USD/CAD Outlook Nov. 18-22

For the second week in a row, the Canadian dollar had an uneventful week and posted modest gains against the US currency. USD/CAD closed the week at 1.0438. This week’s key events include Core CPI and Core Retail Sales. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

Canadian Trade Balance and Manufacturing Sales both beat their estimates. US numbers were not strong, as Unemployment Claims and Trade Balance disappointed.

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

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

Foreign Securities Purchases: Monday, 13:30. Foreign Securities Purchases tends to fluctuate, making accurate forecasts difficult. Last month, the indicator posted a modest gain of 2.08 billion dollars, well short of the estimate of 7.21 billion. The estimate for October stands at 6.71 billion.
BOC Senior Deputy Governor Tiff Macklem Speaks: Monday, 16:00. Macklem kicks off appearances by several senior officials from the BOC, including Governor Stephen Poloz. Macklem will be speaking at an event in Montreal dealing with risk management and financial reform. Remarks that are more hawkish than expected is bullish for the Canadian dollar.
BOC Deputy Governor John Murray Speaks: Tuesday, 22:45. Murray will speak at Mount Allison University in New Brunswick. Analysts will be looking for hints regarding the BOC’s future monetary policy.
Wholesale Sales: Wednesday, 13:30. 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.
BOC Governor Stephen Poloz Speaks: Wednesday, 21:15. Poloz will testify before the Senate Standing Committee on Banking, Trading and Commerce in Ottawa. Analysts will be looking for hints regarding the BOC’s future monetary policy.
Core CPI: Friday, 13:30. Core CPI is the most important inflation indicator, and an unexpected release could affect the direction of USD/CAD. The index has been very steady, with the past two releases showing a gain of 0.2%. The markets are anticipating a flat reading of 0.0% in the upcoming release.
Core Retail Sales: Friday, 13:30. This key consumer spending indicator fell to 0.4% in September, but still beat the estimate of 0.2%. The estimate for October stands at 0.4%.
CPI: Friday, 13:30. Volatile items make up about 25% of the index, which is why Core CPI is considered a better gauge of inflation. Still, CPI is an important release. The index has looked weak in recent readings and posted a slight gain on 0.2% last month. No change is expected in the October reading.
Retail Sales: Friday, 13:30. Automobile Sales, which tend to be volatile, make up about 20% of Retail Sales, so this indicator is not considered as accurate as Core Retail Sales. The indicator dropped to just 0.2% in September, missing the estimate of 0.3%. The forecast for October is stronger, with an estimate of 0.5%.

* All times are GMT.

USD/CAD Technical Analysis

USD/CAD opened the week at 1.0484 and touched a high of 1.0526. The pair then reversed direction, dropping to a low of 1.0436, breaking through weak support at 1.0446 (discussed last week). The pair closed the week at 1.0438.

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

Technical lines, from top to bottom:

We begin 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 continues to switch roles and has reverted back to a resistance 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 bullish on USD/CAD

The Canadian dollar remains under pressure as USD/CAd touched above the 1.05 level this week. If US numbers get back on track this week, we could see the US dollar improve. As well, specuation about a possible December taper is bullish for the US currency.

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer. Kenny's Google Profile

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