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USD/CAD had another quiet week, the Canadian dollar was almost unchanged  and  closed the week  slightly below  the 1.03 level. This week’s highlights include Building Permits, Trade Balance and Employment Change.  Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

Canadian GDP posted respectable growth, but the Canadian dollar failed to take advantage. In the US, the government shutdown continues and this is putting broad pressure on the US dollar.

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USD/CAD daily chart with support and resistance lines on it. Click to enlarge:   USD CAD Outlook Oct. 7-11th

  1. Building Permits: Monday, 12:30. The week gets off to a  fast start with this key release. Building Permits tends to show a lot of volatility, making accurate forecasts a tricky task. In August, the indicator jumped a remarkable 20.7%, crushing the estimate of a 4.4% gain. The markets are bracing for a weak reading this time around, with an estimate of -2.4%. Will the indicator again surprise the markets and past another gain?
  2. Housing Starts: Tuesday, 12:15. Housing Starts have been losing ground in the past couple of releases. The August reading came in at 180 thousand, well of the estimate of 175 thousand. The September forecast stands at 175 thousand.
  3. Trade Balance: Tuesday, 12:30.  Canada’s trade  deficit continues to widen. The deficit hit -$0.9 billion in August, a five-month high and well above the estimate of -$0.3 billion. The markets are expecting some improvement in the September release, with an estimate of -$0.7 billion.
  4. NHPI: Thursday, 12:30. The New Housing Price Index is an important gauge of activity in the housing sector. The index has been steady, posting slight gains throughout 2013. The August release came in at 0.2%, and the September release calls for a gain of 0.3%.
  5. Employment Change: Friday, 12:30. Employment Change is one of the most important economic indicators and can have a major impact on USD/CAD. The August release was practically off the charts, with a gain of 59.2 thousand. This  easily beat the  estimate of 21.2 thousand. The estimate for September stands at  a respectable  15.3 thousand. The Unemployment Rate remains steady, and came in at 7.1% in August. No change is anticipated in the September release.
  6. BOC Business Outlook Survey: Friday, 14:30. This report is issued   each quarter and surveys about 100 businesses, who are asked to rate general business economic conditions. Although the survey is considered a minor indicator, a negative survey is bearish for the dollar.
  7. BOC Senior Deputy Governor Tiff Macklem Speaks: Friday, 16:15. Macklem will be take part in a panel discussion in Washington. Analysts will be looking for clues regarding the BOC’s monetary policy.
  8. BOC Deputy Governor  John Murray Speaks: Friday, 20:00. Murray will be speaking at an event hosted by the IMF in Washington. If Murray’s remarks are more hawkish than expected, the Canadian dollar could gain some ground.

* All times are GMT.

USD/CAD Technical Analysis

USD/CAD opened the week at 1.0313 and touched a low of 1.0288. The pair reached a high of 1.0356, breaking above resistance at 1.0340  (discussed last week), and closed the week at 1.0290.

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 was a cap in mid-July, but has been  providing support for the past  several weeks.  This line has some breathing room as the pair trades in the low-1.03 range.

1.0340  is  a weak resistance line. It was breached by the pair, but remained intact at the end of the week. If could see activity early this week.

USD/CAD continues to receive support at 1.0250. This  line could face strong pressure if the Canadian dollar can post some gains.

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 resistance 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

USD/CAD has been staying close to the 1.03 line for several weeks, and this pattern could continue into October. The greenback remains under pressure from the shutdown, but a prolonged crisis could also affect the Canadian dollar, as Canada is heavily dependent on its southern neighbor. Key Canadian releases such as Building Permits and Employment Change could have a strong impact on the movement of USD/CAD.

Further reading: