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USD/CAD edged to new highs once again, as the greenback gained across the board. Retail sales and inflation data are the major events this week. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

Mid East violence is strengthening the US dollar more than the rise of oil prices helps the loonie. Canadian manufacturing sales increased 0.4% in September following 0.9% growth in August in light of sharp rise in aerospace product and parts, but sales plunged in the auto industry. Analysts expected a lower climb of 0.3%. The relatively weak reading reflects the slowdown in global economy. However this growth will be accounted for in the last GDP report.

Updates: Wholesale Sales will be released later on Tuesday. The markets are expecting a gain of 0.5%, for the second month running. USD/CAD is steady, as the pair was trading at 0.9961. Wholesale Sales posted disappointed the markets, posting its worst figure in three years. The indicator dropped 1.4%, while the estimate stood at a gain of 0.5%. BOC Deputy Governor Timothy Lane delivered remarks at a meeting in New Brunswick.   Core Retail Sales will be released later on Thursday. USD/CAD is steady, as the pair was trading at 0.9962.

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:USD/CAD Technical Analysis November 19 23 2012

  1. Wholesale Sales: Tuesday, 13:40. Canadian wholesalers rebounded from a two months of sales declines in August, rising 0.5% to $49.7 billion, following 0.7% plunge in July.  machinery, equipment and supplies sector increased 1.4%, while declines occurred in the motor vehicle and parts sector. A 0.3% rise is forecast this time.
  2. Timothy Lane speaks: Wednesday, 16:20.   BOC Deputy Governor Timothy Lane is scheduled to speak in New Bruncsck. As BOC Deputy Governor, his speech may enclose important information on the BOC’s future monetary policy.
  3. Retail sales: Thursday, 13:30. Canadian retail sales disappointed in August, rising modestly by 0.3% missing predictions of a 0.4% increase. This reading followed a 0.7% increase in July. Meanwhile motor vehicles and parts, core CPI increased 0.4% in August following 0.5% increase in the previous month, beating predictions for a 0.3% rise. However despite the choppy pattern in retail sales readings, analysts believe growth is here to stay. A rise of 0.6% is expected in retail sales and a 0.5% increase is forecasted in Core sales.
  4. Inflation data: Friday,13:30. Canadian inflation remained mild in September rising 0.2%, following the same rise in August. Meanwhile, core inflation, excluding petrol and other volatile components, increased by 0.2%, lower than the 0.3% anticipated and following a 0.3% rise in the previous month indicating no inflation pressures in the Canadian economy. Economists believe the BOC will lift its benchmark interest rate in the fourth quarter of 2013. CPI is expected to increase by 0.2% while Core CPI is forecasted to grow 0.3%.

 * All times are GMT.

USD/CAD Technical Analysis

Dollar/CAD started off with tight range trading under the parity line. It eventually moved higher, topping at 1.0040 – a new high since the summer. This is a new line that didn’t appear  last week.

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.1.0040 is the new peak in November after 1.0020 was broken, and serves as another line of defense.

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. Channel trading is becoming more significant.

I remain neutral on USD/CAD.

The  price of oil  has risen as violence erupted between Israel and Hamas, which controls the Gaza Strip. In addition, the relative strength of the US economy, as recorded before data was distorted by Sandy, will continue to help the loonie. On the other hand, some worries about the Canadian economy and more importantly the global slowdown (fiscal cliff blamed) is weighing on the Canadian dollar.

 Further reading: