The Canadian dollar had a busy and positive week, and will now have a lighter one – a week in which technicals will have more impact. Here’s an outlook for the Canadian events and an updated technical analysis for USD/CAD, now at lower ground.
USD/CAD daily chart with support and resistance lines marked. Click to enlarge:
The third rate hike in Canada wasn’t fully priced, and the release boosted the Canadian dollar. Employment data was also better than predicted and helped push USD/CAD lower. This week, quarterly figures will provide a long term view.
- Labor Productivity: Published on Tuesday 12:30. This quarterly release comes rather late. Nevertheless, it’s of high importance and rocks the loonie. In Q1, productivity rose by only 0.7%, half of early expectations. This was good for the Canadian dollar, as low productivity means higher salaries – higher inflation. A similar rise in productivity is expected now – 0.9%.
- Capacity Utilization Rate: Published on Tuesday, 12:30. Utilizing more of the available resources means a stronger economy and a chance of a rate hike to cool it down. In Q1, the utilization rate climbed to 74.2%. A similar rate is expected now.
- Manufacturing Sales: Published on Wednesday, 12:30. Sales at the gates of manufacturers serve as a good gauge. This stable indicator rose by 0.1% last month, weaker than previous months but exceeding expectations of a drop. Another modest rise is predicted now.
All times are GMT.
USD/CAD Technical Analysis
The Canadian dollar’s week didn’t start of well – An initial drop lower failed and USD/CAD rose to test the 1.05 line (mentioned in last week’s outlook). It then made a sharp drop under 1.04 and tested 1.0280 before closing at 1.0366.
The 1.04 line was the bottom border of a long-term wide range between 1.04 and 1.0750, and now serves as a minor resistance line. Above, 1.05 capped the pair in the past week and also a few weeks ago – it’s now a strong resistance line.
Higher, 1.0680 is a double and stubborn top – it capped USD/CAD at the end of August and also at the beginning of July. Above this line, the pair will meet resistance at 1.0750 which was a resistance line in May last time, and then 1.0850, a swing high in May that also provided resistance back in 2009.
Looking down, 1.0280 supported the pair in July and was also tested in the past week – making it a strong support line. Lower, 1.02 was the 2009 low and also worked as a resistance line after the pair hit parity. It’s now a minor support line.
Lower, the 1.01 line provided support in May and in August and is a strong support line before the ultimate line – parity.
I remain bearish on USD/CAD.
This week’s excellent job figures, among other figures, showed that Canada is on the right track, and will outshine other countries.
Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro/Dollar Forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD/USD forecast.
- For the New Zealand dollar (kiwi), read the NZD/USD forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast.
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