Search ForexCrunch

The  Canadian dollar  couldn’t keep up the fight as European troubles and also a jump in local unemployment weighed on it.  Housing Starts and trade balance are the major events this week. Here’s an  outlook  for the Canadian events and an updated technical analysis for the Canadian dollar.

Last week, Canadian GDP came out better than expected expanding 0.3% indicating a positive growth rate in the third quarter. However employment data disappointed with an unexpected decrease of 54,000 in the number of jobs while an increase of 16,300 was forecasted and a worse than predicted Unemployment rate reaching 7.3% from 7.1% in the previous month. Will the Canadian market prove its resistance in face of global uncertainty?

The Canadian dollar makes fresh gains on rising oil prices, that come from Iranian fears. Here are 5 reasons why Israel will not attack Iran. USD/CAD rose and met tough resistance at 1.0263, before falling. Canadian housing starts came out better than expected, but the pair mostly moves on the European debt crisis, around Italy.

USD/CAD  daily chart with support and resistance lines on it. Click to enlarge:USD/CAD Chart November 7 11 2011

  1. Mark Carney speaks: Tuesday, 13:05.  Governor of the BOC is scheduled to speak in London. His speech can cause volatility in the market.

  2. Housing Starts: Tuesday, 13:15. Canadian housing starts climbed  higher than expected by206,000 inSeptember after 191,900 addition in the previous month. Economists predicted a lower figure of 187,000 starts. The main rise was in condominiums. Despite the bleak international outlookCanadamaintains a healthy economy. An increase of 201,000 is predicted now.
  3. NHPI  : Wednesday, 13:30. New home prices increased in August for the fifth straight month amid encouraging expansion in the housing sector. New home price index edged up 0.1% as in the previous month in line with expectations. A rise of 0.2% is forecasted.
  4. Trade Balance: Thursday, 13:30. Canadian imports increased over exports in August expanding deficit to $622 million after $539 million in July. Imports increased by 0.7% while exports rose by 0.5%. However economists believe exports will increase had in hand withCanada’s economic growth. Deficit is expected to narrow to $500 million.

* All times are GMT.

USD/CAD  Technical  Analysis

Dollar/CAD rose above the parity line (mentioned last week) early in the week, and never looked back. It traded in a range between 1.0060 and 1.0230 throughout the rest of the week.

Technical lines, from top to bottom:

1.0677 is a distinct and veteran resistance line, which worked well in October and also in the past. 1.0500 is a minor resistance line. It was a  pivotal around the same time and was a  point  of resistance before the pair fell.

1.0360 capped the pair in September and October and also provided support.  1.0263 is the peak of recent surges during October and is strong resistance now.

Just below the previous line, 1.0230 worked well as resistance in November and provided some support earlier. 1.0143 was a swing low in September and worked as resistance in the past. It is minor now.

1.0060 worked as support in November and had the opposite role back in 2010. The very round number of USD/CAD parity is a clear line of course, and it will be closely watched on a potential downfall.

Under parity,  the round number of 0.99 provided support on a fall during October and also served as resistance back in June. 0.9830 provided support for the pair during September.

0.9780, where the current run began is the next and important support line.  Below, 0.9667 is of importance after working as strong support back in March.

0.9580 was resistance in April, then resistance and then support once again. It is followed by 0.9520, which was also an important line of support in April and May.

The last line is 0.94 which was a multi-year low in July.

I am neutral on USD/CAD.

The very disappointing employment figures, that practically erased the previous gains, are quite worrying. On the other hand, the improvement in the US certainly helps the loonie. More range trading is likely.

For news on oil which also impacts the loonie, see Trading NRG.

Further reading: