USD/CAD Outlook May 6-10

The Canadian dollar  rocked and rolled on international events, and now local events will move the loonie.  Housing and employment data as well as Ivey PMI are at the top of our list this week. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

Last week, The Canadian economy grew by 0.3%, advancing at the same pace as the previous month. This positive growth came amid expansion in the mining, oil and gas industries and is likely to improve the quarterly GDP. And we know who will lead the Bank of Canada: Stephen Poloz, but we still don’t know what type of policy will take shape.

Updates: It was a busy start to the week, as Canada released two key events on Monday. Building Permits were outstanding, jumping for 1.7% to 8.6%. This blew away the estimate of 0.7%. However, Ivey PMI went the opposite direction, falling from 61.6 points to 52.2. This was well  below the estimate of 58.3. Housing Starts will be released on Wednesday. USD/ CAD remains steady, as the pair was trading at 1.0075. Housing Starts came in at 175 thousand, matching the forecast. NHPI will be released later on Thursday, and Employment Change and the Unemployment Rate on Friday. The loonie continues to move towards parity. USD/CAD was trading at 1.0016. Friday: the US dollar stormed across the board and USD/CAD bounced from parity. See how to trade the employment data with USD/CAD.

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

1. Building Permits: Monday, 13:30. The value of Canadian building permits edged up less than expected in February, increasing 1.7% amid sharp decline in plans for multi-family housing. The rise followed a 1.8% gain in January. Economists expected permits to jump 3.7% in February but drop by nearly a fifth in 2013. A further rise of 0.7% is forecasted.
2. Ivey PMI: Monday, 15:00. The Canadian Ivey Purchasing Managers Index, soared to 61.1 in March from 51.1 in February, climbing to its highest level since August 2012. The rise was well above market expectations, indicating expansion trend.  A small decline to 58.3 is forecasted.
3. Housing Starts: Wednesday, 13:15. Canadian housing starts gained pace in March reaching an annualized rate of housing starts was 184,028 units following 183,207 in February, indicating Canada’s housing sector is simply cooling, not crashing. The main rises occurred while housing starts rose for a second straight month, all the strength was in the rural market while urban starts contracted sharply. Analysts expected a lower reading of 176,500. A smaller reading of 175,000 is expected this time.
4. NHPI: Thursday, 13:30. The new Housing Price Index (NHPI) gained 0.2% in February following a climb of 0.1% in January. The rise was above predictions for a 0.1% increase. The main contributor to this rose was Calgary where housing prices went up 1.0% in February. The increase happened mainly due to higher costs of materials, labor and developed land. A further increase of 0.1% is expected.
5. G7 Meetings: Fri-sat. The G7 meetings hosted by the Chancellor of the Exchequer George Osborne and the Governor of the Bank of England Sir Mervyn King, will meet in the UK and discuss the ongoing debt crisis in Europe and the challenges that face the global economy. The meetings are attended by finance ministers and central bankers from 7 industrialized nations.
6. Employment data: Friday, 13:30.  Canada’s job market contracted unexpectedly in March, losing 54,500 jobs following the previous month’s big gain of 50,700 jobs. The reading was way below the forecast of 68,000 job addition. This weak reading pushed unemployment rate up to 7.2% in March from 7.0% in the preceding month, indicating a slow start to the year. An addition of 13,500 jobs is expected while unemployment rate is expected to remain 7.2%.

* All times are GMT

USD/CAD Technical Analysis

Dollar/CAD began the week trading between the 1.01 and the 1.0125 lines (mentioned last week). It then dropped and challenged 1.0050 before rising back up and tumbling back down to close at 1.0078.

Technical lines, from top to bottom:

1.0523 was a peak back in November 2011 and is minor resistance. 1.0446 was the peak that the pair recorded in June 2012 and is a key line on the upside.

1.0340 was the peak during March 2013 and its position strengthens at the moment. Consequent rises failed to reach this line, and this could be a bearish sign. 1.0285 replaces the round 1.03 line – the pair found resistance at this line during April 2013.

1.0250 was a peak before the pair moved below parity a long time ago, and worked as support quite well in March 2013. It is stronger once again. 1.0180 provided support for the pair during March, and late switched to resistance. It is now a pivotal line.

1.0125 gave its support to the pair during April 2013 and remains important despite the temporary break.  1.01, was a trough back in July, and switched to resistance afterwards. The line proved its strength several times in 2013.

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.  0.9910 remains the chart after serving as a bottom border for the pair in November 2012. It already managed to work as weak resistance in December 2012.

0.9880 showed that it is a clear separator in October 2012. It also had a role in the past. This line switches roles once again.

I am bearish on USD/CAD

The relatively positive jobs report in the US is a good sign for the Canadian economy as well. In addition, the see-saw between a good jobs report in Canada and a weak one could continue, with a positive one this time. Also the price of oil supports the loonie.

 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