USD/CAD Outlook September 16-20

USD/CAD  had a quiet week, and posted modest losses at the  end  the week.  The pair closed at  1.0359.  This week’s major releases  are Manufacturing Sales and Core CPI.  Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

The Canadian dollar flexed some muscle late in the week, as Employment Change soared to 59.2 thousand, crushing the estimate of 21.2 thousand. In the US, PMI data looked good, but Non-Farm Payrolls fell short of the estimate.

[do action=”autoupdate” tag=”USDCADUpdate”/]

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:   USD CAD Outlook Sep. 16-20th

  1. Foreign Securities Purchases: Monday, 12:30. Foreign Securities Purchases is directly linked to currency demand, since foreigners must use Canadian dollars in order to purchase Canadian securities. The indicator looked awful in July, with a loss of -15.41 billion dollars. This was nowhere near the  estimate of 7.77 billion. The markets are expecting a much smaller decline for the August release, with an estimate of -2.23 billion dollars.
  2. Manufacturing Sales: Tuesday, 12:30. This is the first key release of the week. Manufacturing Sales dropped 0.5%, in July, compared to a 0.7% gain the month before. The estimate stood at 0.5%. The markets are expecting a sharp turnaround, with an estimate of a 0.6% gain. Will the indicator meet or  beat this rosy prediction?
  3. BOC Governor Stephen Poloz Speaks: Wednesday, 14:40. Poloz will address the Vancouver Board of Trade. Analysts will be looking for clues as to monetary policy or interest rate shifts in the speech. Any remarks  which are “out of the ordinary” could affect the movement of USD/CAD.
  4. Wholesale Sales: Thursday, 12:30.Wholesale Sales disappointed with a sharp decline of -2.8% in July, its first decline since January. This was well off the estimate of -0.5%. The markets are expecting much better news for the August release, with an estimate of a 1.6% gain.
  5. Core CPI: Friday, 12:30. Core CPI is considered the most important inflation indicator. It is more reliable than CPI, since it removes the most volatile items that are included in CPI. The indicator has not shown much strength in recent readings, posting a flat 0.0% in July. This matched the market forecast. Little change is expected in the upcoming release, with an estimate of a weak 0.1% gain.
  6. CPI: Friday, 12:30. CPI continues to post weak gains, with a July reading of just 0.1%. This matched the  estimate. No change is expected in the August release.

* All times are GMT.

USD/CAD Technical Analysis

USD/CAD opened the week at 1.0413 and touched a high of 1.0414. The pair then  fell sharply,  dropping  all the way  to 1.0306. USD/CAD closed the week at 1.0349, as the support line at 1.0340 (discussed last week) remained intact.

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


Technical lines, from top to bottom:

We  begin with resistance at 1.0958, which is  protecting the key 1.10 level. This line has remained intact since September 2009.

1.0853 is next. 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. It had provided strong resistance since July, but reverted to a support line earlier this month. It is back in   resistance role after the pair dropped   sharply this week.

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 mid-1.03 range.

1.0340 is providing USD/CAD with weak support. This line was breached during the week but the Canadian dollar then recovered. 1.0250 is next. This  line has not  been tested since July.

1.0180 provided support for the pair during March, and saw a lot of activity in the first half of June. 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.

The final support line for now is 0.9910.  This line  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.

I  am  bullish  on USD/CAD

The Canadian economy continues to have trouble and has not been able to keep pace with its southern neighbor. In the US, speculation about QE tapering is bullish for the US dollar, and the FOMC could make a decision regarding QE at its meeting later this week. Until then, the uncertainty should be boost for the greenback, as investors stick with the safe-haven US dollar.

Further reading:

Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.