The Canadian dollar was almost unchanged for the second straight week, with USD/CAD closing at 1.0849. This week’s highlight is GDP. Here is an outlook on the major events and an updated technical analysis for USD/CAD.
The Federal Reserve minutes did not have any dramatic news, as policymakers sounded cautious about the economy and discussed exit strategies from QE. The markets are betting on a rate hike in 2015, but the minutes didn’t provide a timetable as to when rates might go up and by how much. US Unemployment Claims looked weak, while key housing numbers were a mix. Canadian numbers did not impress, as retail sales softened and CPI posted continues to lose ground.Updates:
- Corporate Profits: Tuesday, 12:30. This report is released on a quarterly basis, magnifying the impact of each release. The indicator increased 0.8% in Q4 of 2013, and the markets are hoping for another gain in Q1.
- Current Account: Thursday, 12:30. Current Account is closely linked to currency demand, as foreigners much purchase Canadian dollars in order to purchase Canadian goods and services. The deficit has been growing, and reached -$16.0 billion in Q4, although this did beat the estimate of -$16.5 billion. The markets are expecting a strong improvement in Q1, with the estimate standing at -$12.4 billion.
- GDP: Friday, 12:30. This is the major event of the week, and could have a major impact on the movement of USD/CAD. The March reading dipped to 0.2%, matching the forecast. Another weak reading is expected in April ,with an estimate of just 0.1%.
- RMPI: Friday, 12:30. The Raw Materials Price Index gauges inflation in the manufacturing sector. The index dropped sharply to 0.6% last month, well below the forecast of 1.2%. The markets are expecting better news from the April release, with an estimate of 1.2%.
USD/CAD Technical Analysis
USD/CAD opened the week at 1.0865 and touched a high of 1.0942. The pair then retracted to a low of 1.0849, breaking below support at 1.0853 (discussed last week).
Live chart of USD/CAD:
Technical lines, from top to bottom:
We start with resistance at 1.1369. This line was breached in October 2008 as the US dollar posted sharp gains, climbing as high as the 1.21 level. This line has remained steady since July 2009.
1.1124 remains a strong resistance line. It has held firm since late March.
The psychological barrier of 1.10 saw a lot of action in April and has strengthened as a strong resistance line.
1.0945 held firm last as the pair briefly pushed into 1.09 territory.
1.0853 was breached for a second straight week. It is a weak line and could see action early in the week.
1.0723 is the first support level. It was a cap in mid-2010, before the US dollar tumbled and dropped all the way into 0.93 territory.
1.0660 saw a lot of activity in the second half of December and continues to provide strong support.
1.0519 has been a strong support line since late November.
1.0422 is the final support level for now. It was a key support line in mid-November.
I am bullish on USD/CAD
US numbers have been relatively strong, and the Fed’s continuing tapers is a vote of confidence in the economy. Canadian numbers have been lukewarm, and the loonie could soften if the upcoming GDP release falls short of market expectations.
- 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.