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USD/CAD  had a quiet week, as the pair was almost unchanged at the end of the week. The pair closed at 1.0532. There are a host of major releases this week ,including the BOC Rate Statement, Employment Change and Ivey PMI. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

Canada’s only key release last week, GDP, posted its first decline in six months, but was very close to the estimate. US numbers were a mixed bag. In the US, housing and manufacturing numbers were weak, but employment and GDP data was positive.

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USD/CAD daily chart with support and resistance lines on it. Click to enlarge:

USD CAD Outlook Sep. 2-6th

  1. Trade Balance: Wednesday, 12:30. Canada continues to post monthly trade deficits. In August, the deficit increased from -0.3 billion to -0.5 billion dollars, matching the estimate. The markets are expecting a deficit of -0.4 billion dollars in September.
  2. BOC Overnight Rate: Wednesday, 14:00. The BOC will  announce its benchmark interest rate  through a rate statement. The rate has been pegged at 1.00% for the past three years, and no change is anticipated.
  3. Employment Change: Friday, 12:30. Canada posted an awful Employment Change release in August, with a decline of -39.4 thousand. This shocked the markets, which had anticipated a gain of 6.2 thousand. The markets are expecting a strong turnaround in the September release, with an estimate of 30..2 thousand. Will the indicator follow through with a strong reading? The Unemployment Rate is expected to remain unchanged at 7.2%.
  4. Labor Productivity: Friday, 12:30. Labor Productivity is an important indicator, and its release on a quarterly basis increases its impact. The indicator posted a slim gain of  0.2% in Q1, and a rise of 0.3% is predicted for Q2.
  5. Ivey PMI: Friday, 14:00. This index is based on a survey of about 175 purchase  managers. The indicator has been in a sharp decline in recent months and  came in at 48.4 points in  the August release. This was the lowest reading since December 2012. The markets are expecting a sharp rebound in the upcoming release, with an estimate of 55.1 points.

* All times are GMT.

USD/CAD Technical Analysis

USD/CAD opened the week at 1.0504 and dropped below the 1.05 line, touching a low of 1.0492. The pair then  rebounded, climbing to a high of 1.0558.  USD/CAD closed the week at 1.0532, as support at 1.0523 (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 110.43. This line provided key resistance in the latter part of 2009.

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, last tested  in  September 2010.

1.0523 was a peak back in November 2011. It had provided strong resistance since July, but has reverted to a support line as USD/CAD moved slightly higher this week. It is a weak line and could see more activity early this week.

1.0446 was a cap in mid-July. The pair broke through this line and it has reverted to a support role. It is  not a strong  line, and could face more pressure if the Canadian dollar can rebound.

1.0340, which saw a lot of activity in July and  August,  is providing strong support to the pair as the pair trades close to the 1.05 line.

USD/CAD is receiving support at 1.0250. This  line worked as support quite well in 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 in other occasions beforehand. It remains a barrier before parity. The very round number of parity is a clear line and has provided support 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 struggle, and a weak GDP release certainly won’t inspire more confidence. In the US, the economy continues to improve, and speculation that the Fed could take action and taper QE as early as September could boost the US dollar to higher levels.

Further reading: