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USD/CAD  posted modest gains last week as the pair pushed above the 1.04 line but was unable to  sustain  the drive and closed the week  at 1.0368. This week’s highlights include Ivey PMI and Employment Change. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

Canadian numbers were respectable last week, and GDP edged past the estimate with a 0.2% gain. However, this was not enough to prevent the Canadian dollar from losing some ground, as  weak US releases caused investors to seek safety with the US dollar.

Updates:

  • USD/CAD opened the week in a relatively steady trading session, while the dollar is weakening across the board. 1.0335 is the current level.
  • Bad manufacturing PMI in the US weakens the dollar across the board, and the loonie enjoys it.
  • USD/CAD loses 1.03 on the extended fall of the US dollar, which is snowballing.
  • BOC Deputy Governor Timothy Lane spoke in Seoul. Canadian Trade Balance disappointed, as the deficit widened to $-0.6 billion, above the estimate of -$0.4 billion. In contrast, US Trade Balance beat the estimate, as the deficit came in at $-40.3 billion.
  • Canada will release Building Permits, a key event, on Wednesday. USD/CAD has moved higher, as the pair was trading at 1.0325.
  • USD/CAD is trading at 1.0343, higher than earlier, as pressure mounts on commodity currencies.
  • Here is an updated Elliott Wave Analysis for the pair:  Correction Appears Complete, New Highs In View
  • Canadian building permits leap 10.5%, much better than a drop of 2.3% which was expected. USD/CAD is lower also thanks to the miss in the US ADP NFP: only 135K instead of 165K expected.
  • US ISM Manufacturing PMI came out within expectations, but with a weak employment component. USD/CAD is around 1.0350.
  • On Thursday, the new Governor of the BOC, Steven Poloz, will testify before the House of Commons Standing Committee on Finance in Ottawa. Also, Ivey PMI, a key event will   be released.  See how to trade the Canadian Ivey PMI with USD/CAD.
  • Canada will release Employment Change and the Unemployment Rate on Friday.
  • USD/CAD has edged lower, as the pair was trading at 1.0333.
  • The US dollar collapsed across the board – following the mediocre jobless claims and the ECB. USD/CAD fell below 1.02 before stabilizing at around 1.0264.
  • Non-Farm Payrolls +175K, unemployment rate 7.6%  – The slightly better than expected outcome was an opportunity for a big dollar comeback, however, it wasn’t a one-way street, especially not for the loonie: Canada posted a superb gain of 95K jobs in May, and the unemployment rate fell to 7.1%. USD/CAD dropped as low as 1.0166 before climbing back above 1.02.
  • USD/CAD closed the week at 1.0189, enjoying the huge gain in Canadian jobs. A new outlook will be published on Sunday. Stay tuned!

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:     USD CAD Forecast June 3-7

  1. BOC Deputy Governor Timothy Lane:  Tuesday, 0:25. Deputy Governor Lane will participate in a panel discussion at the Bank of Korea in Seoul. If his remarks are more hawkish than expected, this would be bullish for the Canadian dollar.
  2. Trade Balance: Tuesday, 12:30. For the first time since May 2012, Canada did not post a trade deficit, with a $0.0 billion release last month. The markets are expecting the indicator to dip back into negative territory, with an estimate of a deficit of $0.4 billion.
  3. Building Permits: Wednesday, 12:30.  This key indicator has been erratic, making reliable forecasts a tricky task. The indicator jumped 8.6% last month, blowing past the estimate of 0.7%. The markets are bracing for a sharp downturn, with an estimate of -2.3% for the upcoming release.
  4. Ivey PMI: Thursday, 14:00. The key index was a major disappointment in May, falling sharply to 52.2 points. This was well below the estimate of 58.3 points. The estimate for the June release is 55.3 points. Will the index rebound with a strong reading this time around?
  5. Employment Change: Friday, 12:30. This is one of the most important economic indicators, and can have a major impact on the movement of USD/CAD. The indicator rebounded nicely last month, climbing to 12.5 thousand, but fell short of the estimate of 14.8 thousand. The markets are expecting a stronger June release, with an estimate of 17.3 thousand. Will the indicator beat this rosy prediction? The Unemployment Rate currently stands at 7.2%, and the markets are expecting a slight dip, to 7.1%.
  6. Labor Productivity:  Friday, 12:30. Analysts use this indicator to help predict labor-related inflation. The indicator rose 0.1% last month, beating the  forecast of -01.%. The estimate for the June release stands at 0.3%.

* All times are GMT

USD/CAD Technical Analysis

Dollar/CAD started the week  at 1.0320 and  broke above the 1.04 line, touching a high of 1.0421.  The loonie  then flexed some muscle as the pair dipped below 1.03, dropping to a low of 1.0294, as 1.0285  (discussed last week) remained intact as a support level. The pair recovered somewhat, and closed out the week at 1.0368.

[do action=”tradingviews” pair=”USDCAD” interval=”60″/]

Technical lines, from top to bottom:

We start with 1.0758. This is a strong resistance line which has held firm since  April 2010. Next is 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 strong resistance. 1.0446 was the peak that the pair recorded in June 2012 and  remains a  key line on the upside.

USD/CAD is receiving support at 1.0340. This weak line could  see further activity early next week. Next, there is support at 1.0285. This line held firm as the pair dipped below the  1.03 level.  We   next encounter support at 1.0180. This line has strengthened as  USD/CAD trades at higher levels.

1.0125 gave its support to the pair during April 2013 and remains important.  1.01 was a trough back in July, and switched to resistance afterwards. It has reverted to strong support line.

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 line of course, and the battle was very clear to see at the beginning of August 2012 and also in 2013. It is a clear separator.

0.9950 provided some support for the pair during November and worked as resistance earlier.  The final support line for now is 0.9880, which  showed that it is a clear separator in October 2012, and continues to provide strong support.

I  remain  bullish  on USD/CAD

The US dollar has  shown recently shown broad strength against the major currencies, including the loonie. The pair continues to test the 1.04 line, and we could see it fall this week if the upward momentum continues.  A  weak GDP gain  underscores trouble in the Canadian economy, and further weak numbers will weigh on the Canadian currency. US numbers were less than stellar last week, and market uncertainty about the US recovery could continue to weigh on the Canadian dollar.

 Further reading: