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The Canadian dollar broke lower. It’s now awaiting the all-important employment figures. Here’s an outlook for the upcoming events in Canada and an updated technical analysis for USD/CAD.

USD/CAD graph with support and resistance lines on it. Click to enlarge:

Canadian dollar forecast

One of the things that helped the loonie was the GDP release – it showed that the Canadian economy is growing at a faster rate than expected. Will jobs continue to show the same positive trend? Let’s start the review. The technical analysis will follow:

  1. Housing Starts: Published on Monday at 13:15 GMT. The Canadian housing sector is advancing steadily month by month. 186K housing starts were reported last month, slightly better than expected. This figure is expected to be left unchanged this time.
  2. Trade Balance: Published on Thursday at 13:30 GMT. Canada’s trade balance is expected to flip from a deficit of 0.2 billion to a surplus of 0.4 billion. The American trade balance is released at the same time, making it a very volatile time to trade USD/CAD.
  3. NHPI: Published on Thursday at 13:30 GMT and overshadowed by the trade balance. The second housing sector figure this week relates to new house prices. Prices have risen in the past six months, usually in small scale. Following last month’s 0.4% rise, prices will probably advance by 0.5%.
  4. Mark Carney talks: Starts speaking on Thursday at 19:05 GMT. In the recent rate decision, Carney didn’t change the schedule for a rate hike (as in previous decisions), but he did cite rising inflation as a concern. The tone of this speech, in the Carleton University in Ottawa will probably shake the loonie.
  5. Employment data: Published on Friday at 12:00 GMT. In recent months, the Canadian job market is improving with occasional hiccups. Last month was really excellent: employment change showed a big rise in jobs 43,000. The unemployment rate dropped to 8.3%, also a great positive surprise. The unemployment rate is expected to remain unchanged at 8.3% and the number of employed people is expected to rise by 17,500. This will supply a strong ending for the week.

USD/CAD Technical Analysis

USD/CAD broke below the 1.04 line that it struggled with at the beginning of the week. Later in the week, it steadily went lower, bottoming out at 1.0260 before closing at 1.0290.

Support and resistance lines haven’t changed since last week’s outlook. USD/CAD is now bound between 1.02 and 1.04, a range that it knows from the past.

Above 1.04 (which is now a resistance line), 1.0680 provides minor resistance before 1.0780 which is a big technical hurdle. It’s the upper border of a bigger range that the loonie traded for a long time.

Even higher, 1.0850 is the next resistance line. It was a peak before the pair entered the current range. Higher, 1.1130 was tested a few times in the past and serves as another resistance line.

Looking down, 1.02 is a strong support line – it worked as such earlier this year. 1.02 was also the 2009 low for this pair. The ultimate support line is 1.0000 – USD/CAD parity. This was last seen a long time ago, but it could be approached soon.

I am bearish on USD/CAD.

The strength of the Canadian economy was seen again in the GDP release and will probably be seen in jobs. 1.02 is a very strong hurdle before parity.

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