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The Canadian dollar had a fairly quiet week, and posted modest gains against the US currency. USD/CAD closed the week at 1.0478. This week’s key events include Trade Balance and Manufacturing Sales. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

US and Canadian employment data was strong this week, but the unexpectedly sharp NFP release on Friday gave the US dollar a boost and sent USD/CAD briefly above the 1.05 line. Canadian Ivey PMI was strong, but Building Permits was well short of the estimate.

[do action=”autoupdate” tag=”USDCADUpdate”/]

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:   USD CAD Outlook Nov11-15

  1. Trade Balance: Thursday, 13:30. Canada continues to post monthly trade deficits. The September deficit widened to -1.3 billion dollars, up from -0.9 billion the previous month. This was  well above the estimate of -0.7 billion and marked the largest deficit  in 2013.  The markets are expecting another weak reading in October, with the estimate standing at -1.2 billion.
  2. NHPI: Thursday, 13:30. The New Housing Price Index is an important gauge of activity in the Canadian housing market. The index has been posting very slight gains in recent months and came in at 0.1% in September. This was short of the forecast of 0.3%. Little change is expected in the upcoming release, with an estimate of 0.2%
  3. BOC Review: Thursday, 15:30. This report is issued each quarter and includes articles related to the economy and central banking. As a minor release, it is unlikely to have much impact on the movement of USD/CAD.
  4. Manufacturing Sales: Friday, 13:30. The week wraps up with this Manufacturing Sales, a key release. The indicator tends to fluctuate  and  posted a slight decline of 0.2% after a sharp gain of 1.7% the month before. The estimate for October stands at 0.3%.

* All times are GMT.

USD/CAD Technical Analysis

USD/CAD opened the week at 1.0417 and dropped to a low of 1.0398. The pair then climbed above the 1.05 line, touching a high of 1.0503, as resistance at 1.0523 (discussed last week) remained intact.  The pair closed the week at 1.0478.

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

 

Technical lines, from top to bottom:

We  start with resistance at 1.0945, which is protecting the key 1.10 level. This line has not been tested since September 2009.

Next is resistance at 1.0853. This line has held firm since May 2010.

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 an important resistance line which was last tested in September 2010.

1.0523 was a peak back in November 2011. This line saw some action in early September and has weakened recently. It held firm as the pair briefly rose above the 1.05 line late last week.

1.0446 began the week as a resistance line but has reverted to a support role. It  is a weak line and could  see further activity early in the week.

1.0340 had a busy October, and has some breathing room as the pair trades at higher levels. 1.0250 is next. This line has held firm since mid-September.

1.0180 provided support for the pair during March, and saw a lot of activity in the first half of June. It remains a strong support line.

The round number of 1.01 was a trough back in July 2012 and switched to resistance afterwards. The line proved its strength several times in 2013, most recently in mid-May.

1.0050 provided support for the pair in May 2013 and on other occasions beforehand. It remains a barrier before parity. The very round number of parity is a clear line and has not been tested since mid-February.

The final support line for now is 0.9910. It  was last tested in January, which marked the start of a strong US dollar rally which saw USD/CAD climb to the mid-1.03 range.

 

I am  neutral on USD/CAD

Both Canada and the US released strong employment data last week, which should increase investor confidence in both economies. The  strong NFP release  will increase speculation about a December QE taper,  which could  bolster the US dollar.  Canadian key events will have to look sharp if the loonie is to keep pace with the strong US dollar.

Further reading: