USD/CAD Outlook Mar 31-Apr 4

The Canadian dollar  rebounded nicely last week, as USD/CAD dropped about 160 points. The pair closed at 1.1059. There are a host of major events this week, highlighted by GDP and Employment Change. Here is an outlook on the major events and an updated technical analysis for USD/CAD.

In the US, Unemployment Claims continue to improve and GDP posted another strong gain. As the Canadian economy is very dependent on its southern neighbor, the strong gave a boost to the Canadian dollar.

[do action=”autoupdate” tag=”USDCADUpdate”/]USD/CAD daily chart with support and resistance lines on it.

Click to enlarge:    

1. GDP: Monday, 12:30. GDP is one of the most economic important indicators, and an unexpected reading can quickly impact on the direction of USD/CAD. Canadian GDP is released every month. The January release disappointed, with a decline of 0.5%. This was lower than the estimate of 0.4%. The markets are expecting a turnaround, with an estimate of 0.4%. Will the indicator meet or beat this rosy estimate?
2. RMPI: Tuesday, 12:30. Raw Materials Price Index measures inflation in the manufacturing sector. The index has posted two straight gains, with an excellent reading of 2.6% last month. Another gain is anticipated, with the estimate standing at 2.3%.
3. Trade Balance: Thursday, 12:30. Trade Balance is closely connected to currency demand, as foreigners need to buy Canadian dollars in order to purchase Canadian exports. Canada has managed to post just one monthly surplus since last May, but the markets are expecting a small surplus in the upcoming release, with an estimate of 0.2%.
4. Employment Change: Friday, 12:30. Employment Change has fluctuated wildly, resulting in estimates that have often been well off the mark. The February reading of -7.0 thousand  was nowhere near the estimate of +16.9 thousand. The markets are expecting a strong turnaround in February, with an estimate of +25.3 thousand. The unemployment rate is expected to remain unchanged at 7.0%.
5. Ivey PMI: Friday, 14:00. The week wraps up with another key indicator, Ivey PMI. Most readings have been above the 50-point level, indicating expansion. The index rose to 57.2 points last month, and the upward trend is expected to continue, with an estimate of 58.3 points.

*All times are GMT.

USD/CAD Technical Analysis USD/CAD  started the week at 1.1226 and touched a high of 1.1246. It was all downhill from there, as the pair fell all the way to 1.1001, just above the key support level of 1.1000 (discussed last week). USD/CAD  closed the week at 1.1059.

Live chart of USD/CAD: [do action=”tradingviews” pair=”USDCAD” interval=”60″/]

Technical lines, from top to bottom: With the Canadian dollar  coming off an impressive week, we  start at  lower levels:

1.1617 marked a high point for the pair in July 2009, at which time the Canadian dollar posted  a rally in which USD/CAD dipped below the 0.94 line. 1.1535 provided key support back in early 2007. It has been a resistance line since July 2009.

1.1369 fell in October 2008 as the US dollar posted  sharp gains, climbing as high as the 1.21 level.

1.1124 has switched back to resistance role following strong gains by the Canadian dollar. It is not a strong line and could face pressure if the US dollar rebounds.

The key psychological barrier of 1.10  held firm, but just barely, as the pair touched a low of 1.1001. Will the loonie continue to improve and move into 1.09 territory?

1.0945 continues to provide the pair with support.

1.0853 is the next support line. 1.0723 was a cap in mid-2010, before the US dollar tumbled and dropped all the way into 0.93 territory.

1.0660 is the final support level for now.  It saw a lot of activity in the second half of December and continues to provide strong support.

I am bullish on USD/CAD

The Canadian dollar had a strong week, although the push came from strong US numbers. The Canadian economy hasn’t impressed in recent releases, and if Canadian numbers do not shine next week, in particular GDP and Employment Claims, USD/CAD could move rise back to the high levels we’ve seen recently.

Further reading:

• For a broad view of all the week’s major events worldwide, read the USD outlook.
• For EUR/USD, check out the Euro to Dollar forecast.
• For the Japanese yen, read the USD/JPY forecast.
• For GBP/USD (cable), look into the British Pound forecast.
• For the Australian dollar (Aussie), check out the AUD to USD forecast.
• USD/CAD (loonie), check out the Canadian dollar.