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USD/CAD  reversed directions this week, as the Canadian dollar  gained close to one cent.  The  pair closed at 1.0284.  This week’s highlights are  Core Retail Sales and the Overnight Rate release. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

The Canadian dollar took advantage of a sluggish US dollar, as optimism faded over the fiscal agreement hammered out in Congress. Canadian releases were not impressive, as Manufacturing Sales declined and inflation indicators were subdued.

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USD/CAD daily chart with support and resistance lines on it. Click to enlarge:    USD CAD Outlook Oct. 21-25th

  1. Wholesale Sales: Monday, 12:30. Wholesale Sales is an important consumer spending indicator. After a sharp decline in July, the indicator b0unced back in August, with a strong gain of 1.5%. This beat the estimate of 1.1%. The markets are expecting a much smaller gain for September, with an estimate of 0.6%. Will the indicator once again surprise the markets with a strong gain?
  2. Core Retail Sales: Tuesday, 12:30. This key indicator is considered more reliable than Retail Sales, since it excludes the volatile automobile sales component. Core Retail Sales were up 1.0% in August, well above the estimate of 0.6%. The markets are bracing  for a weak release  for September, with an estimate of a 0.2% gain.
  3. Retail Sales: Tuesday, 12:30. An important consumer spending indicator, Retail Sales posted a gain of 0.6% in August, matching the forecast. The markets are expecting a smaller gain for September, with an estimate of 0.3%.
  4. BOC Overnight Rate: Wednesday, 14:00. The BOC has maintained its benchmark interest rate at 1.00% for over three years and no change is expected in the upcoming decision. The BOC will announce the new rate in a rate statement.
  5. BOC  Monetary Policy Report:  Wednesday, 14:30. Analysts will be reviewing this report carefully, looking for clues as to the BOC’s future monetary policy. BOC Governor  Stephen Poloz  will hold a press conference shortly afterwards.

* All times are GMT.

USD/CAD Technical Analysis

USD/CAD opened the week at 1.0365 and touched a  high of 1.0391. The pair then changed directions, dropping to a  low of 1.0277  and closing the week at 1.0284, as support at 1.0250  (discussed last  week) remained  intact.

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

 

Technical lines, from top to bottom:

We  start with 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  is  currently providing strong resistance.

1.0446 continues to provide strong resistance. This key line has held firm since early September and has some breathing room with the Canadian dollar improving.

1.0340 started the week as a weak support line, but has reverted back to a resistance role.   1.0250 continues to provide support. It is a weak line and could be tested early in the week.

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.

0.9910 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.

The final support line for now is the round number of 0.9800. This line has held firm since October 2012.

I  am  neutral  on USD/CAD

The Canadian dollar jumped on the bandwagon last week, as the US dollar showed broad weakness. Will the greenback rebound this week? Much will depend on the release of Non-Farm Payrolls, which will be released on Tuesday. This key indicator was suspended during the shutdown, so it  could have a strong impact on the movement of USD/CAD.

Further reading: