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The Canadian dollar retreated from its move towards parity. The upcoming week isn’t very eventful, but it includes the important release of the GDP. Here’s an outlook for Canadian events and an updated technical analysis for USD/CAD.

USD/CAD chart with support and resistance lines marked. Click to enlarge:

canadian dollar forecast

The dollar’s strength, best seen against the Euro, didn’t skip the Canadian dollar, that suffered from the greenback’s strength. Let’s start:

  1. RMPI: Published on Thursday at 12:30 GMT. The Raw Materials Price Index is a good gauge for the loonie, as exports of commodities make a significant portion of the economy. Prices are in a see-saw, switching from a rise to a fall every month. Last month saw a rise of 3.3% after dropping by 1.7% in the previous month.
  2. GDP: Published on Wednesday at 12:30 GMT. Canada publishes its Gross Domestic Product every month – different than most countries that publish it on a quarterly basis. Last month, GDP surprised with a rise of 0.6%, completing a 5% annual growth rate for Q4 of 2009. Growth is expected to be seen in January as well.

USD/CAD Technical Analysis

USD/CAD traded higher in the past week, breaking above 1.02 and reaching 1.0300, a safe distance from the next significant resistance line of 1.04.

The support and resistance lines have been slightly modified from last week’s outlook. Looking up, 1.0300 is a minor line of resistance, being the recent peak. Higher, 1.04 is an important resistance line, serving as a support and resistance line for many months.

Even higher, 1.0680 is the next line of resistance, followed by 1.0780, which provides strong support. They are followed by 1.0850 and 1.1150, but that’s far away.

Looking down, 1.02 continues to be a line of importance, but less significant than it used to be. The ultimate support line remains parity – 1.0000. USD/CAD got 60 pips from it before retreating. Even lower, 0.98 is the next support line.

I remain bearish on USD/CAD.

The Canadian job market looks good, and this will probably be reflected in the GDP. Note that parity with the greenback continues to be a very tough barrier.

Further reading:

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