The Canadian dollar got caught in the US dollar tidal wave last week, as USD/CAD climbed almost 300 points. The pair closed at 1.0455. This week’s major event is GDP. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
The US dollar made steady gains against the Canadian currency last week. The US dollar was broadly stronger following the Fed comments that QE would likely be tapered this year, and the Canadian dollar took another hit after Friday’s release of disappointing Canadian retail sales and CPI numbers.
Updates:
There are no Canadian releases until Wednesday, when BOC Deputy Governor Timothy Lane speaks in Toronto.
USD/CAD has crossed below the 1.05 line.
The loonie remains relatively stable on a new wave of a strengthening US dollar. USD/CAD trades at 1.0470.
BOC Deputy Governor Timothy Lane addressed a financial forum in Toronto.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
BOC Deputy Governor Timothy Lane Speaks: Wednesday, 16:00. Deputy Governor Lane will discuss shadow banking at a financial forum in Toronto. Analysts will be listening carefully for any hints regarding future monetary policy, especially with a new Governor taking the reins of the BOC. A speech which is more hawkish than expected is bullish for the Canadian dollar.
GDP: Friday, 12:30. GDP is one of the most important economic indicators, and an unexpected reading could affect the movement of USD/CAD. Canadian GDP is released every month. The indicator has been steady over the past several readings, and posted a gain of 0.2% in the May release. The markets are expecting a weaker reading this time around, with an estimate of 0.0%.
RMPI: Friday, 12:30. This inflation indicator looks at the change in price of raw materials purchased by manufacturers. The indicator has posted two straight declines, both of which were well below the estimate. The markets are anticipating a turnaround in the June releases, with an estimate of 2.3%.
* All times are GMT
USD/CAD Technical Analysis
Dollar/CAD started the week at 1.0160. The pair touched a low of 1.0150 early in the week, and then shot higher, climbing as high as 1.0489. USD/CAD closed out the week at 1.0455.
Live chart of USD/CAD: [do action=”tradingviews” pair=”USDCAD” interval=”60″/]
Technical lines, from top to bottom:
With USD/CAD moving sharply higher, we start at higher levels. 1.1028 is providing strong resistance. This is followed by 1.0853, which has held steady since September 2009.
1.0705 saw a lot of action in January 2010, but has quietly provided resistance since then. Next, 1.0652 has been providing resistance since early September 2010. This marked a peak as USD/CAD went on a steep slide, falling as low as the 95 line.
1.0523 was a peak back in November 2011 and continues to provide resistance. However, this line has weakened and could face more pressure if the US dollar continues to post gains.
1.0446 which was the peak that the pair recorded in June 2012, finds itself in an unfamiliar support role. This weak line could be tested early next week.
The line of 1.0340 was in a support role in early June, and is back as a support level. This is followed by 1.0285, which broke as USD/CAD surged higher.
1.0180 began last week as weak resistance, and has reverted to providing support.
The round number of 1.01 was a trough back in July, and switched to resistance afterwards. It has reverted back to a support line, and has held firm since mid-May.
1.0050 provided support for the pair in May 2013 and in other occasions beforehand. It remains a barrier before parity. The very round number of USD/CAD parity is a clear separator, and the battle was very clear to see at the beginning of August 2012 and also in 2013.
The final support line for now is 0.9950. This line provided some support for the pair during November and worked as resistance earlier.
I am bullish on USD/CAD
The Canadian dollar was hit hard by a double blow last week. First, the US dollar was broadly stronger after the Fed announcement about QE. The loonie lost more ground after Canadian key releases missed their estimates. The fallout from QE may not be over, and an unimpressive Canadian GDP could send the pair higher.
Further reading:
For a broad view of all the week’s major events worldwide, read the USD outlook.
Kenny Fisher - Senior Writer
A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.
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