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The Canadian dollar was eventually hit by the “risk off” atmosphere that followed the re-election of Obama. This battle on parity could end with a defeat for the loonie. Foreign Securities Purchases is the highlight of this week. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

Last week, the value of building permits unexpectedly dropped by 13.2% in September following a 7.9% increase in August, in light of a sharp decline in the  non-residential sector. Meanwhile Canadian trade deficit contracted unexpectedly to C$826 million in September from a C$1.50 billion deficit in the preceding month. The rise occurred mainly due to a jump in crude oil shipments.

Updates: No Canadian releases are scheduled until Thursday. The loonie continues to hover around the parity line. USD/CAD was trading at 0.9999. Manufacturing Sales will be released later on Thursday. The markets are expecting a sharp drop, with an estimate of a modest gain of 0.3%. The markets are awaiting the BOC  Review, which is published each  quarter. A report which is considered hawkish could bolster the loonie. Foreign Securities Purchases will be published on Friday. The markets are expecting an improvement over the October release. USD/CAD is steady, as the pair was trading at 1.0017.

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:USD/CAD Technical Analysis November 12 16 2012

  1. Manufacturing Sales: Thursday, 13:30.Canada’s manufacturing sector rebounded in August following the 0.8% decline in July by rising 1.5%. This strong figure raised hopes for a strong third quarter readings for the economy. The reading was sharply above the 0.3% rise forecasted by analysts indicating domestic manufacturers are in a growth momentum. An increase of 0.3% is expected now.
  2. BOC Review: Thursday, 15:30. Bank of Canada will release its quarterly review including material related to the economy and central banking, written by the bank’s stuff offering monetary and financial insight to the Canadian economy.
  3. Foreign Securities Purchases: Friday, 13:30. Foreign investors purchased 6.90 billion Canadian dollars ($7.04 billion) of Canadian securities in August, missing forecasts for an 8.72 billion Canadian dollars and following 6.67 billion in the previous month. The reading supports BOC Governor Mark Carney’s assessment that Canada is an attractive investment destination.

* All times are GMT.

USD/CAD Technical Analysis

$/C$ started off with a big fall, and challenged the 0.9880 line (mentioned last week). It then turned around, and made a sharp move higher, reaching a new 3 month high at 1.0033 before descending back to parity zone.

Technical lines, from top to bottom:

 Far in the distance, 1.0372 was a peak in June and also beforehand. 1.0250 was a peak back in July, more than once, and is minor now.

1.02 was the trough of 2009 and remains important since then, working in both directions. Another round number, 1.01, was a trough back in July, and switched to resistance afterwards.

1.0066 was key support before parity. It’s strength during July 2012 was clearly seen and it gave a fight before surrendering. Now, it is somewhat weaker. 1.0020 capped the pair in October 2012 and is the next line of defense around after 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. Just below parity, the 0.9975 line is the next line.

0.9880 showed that it is a clear separator in October 2012. It also had a role in the past. 0.9817 was a stubborn peak in September and is now significant resistance. It is a weaker line at the moment.

Lower, 0.9725 worked as strong support back at the fall of 2011 and showed its strength once again in October 2012. 0.9667, which was another strong cushion in June 2011 is the next line.

The round number of 0.96 provided some support back in 2011 and is minor now.

Wide Uptrend Channel

As the chart shows, the pair is trading in a wide uptrend channel since mid-September, and is now in the middle of the range.

I remain neutral on USD/CAD.

More falls in the  price of oil  weigh on the pair. On the other hand, some calm regarding the fiscal cliff could boost the appetite for risk, helping the loonie. We might see another battle over parity once again.

 Further reading: