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The Canadian dollar showed some strength during the week against the US dollar, but was unable to hold onto these gains, and ended the week almost unchanged. USD/CAD  closed the week just above the 1.03 line.  This week’s major release is Core Retail Sales.  Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

The Canadian dollar posted sharp gains following the Fed’s non-taper announcement, but was unable to consolidate these gains, and climbed back above the 1.03 line. US releases bounced back  last week, led by a solid Unemployment Claims release. Manufacturing and housing data also was strong.

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:   USD CAD Outlook Sep. 23-27th

  1. Core Retail Sales: Tuesday, 12:30. This is the key release of the week. Core Retail Sales is considered more reliable than Retail Sales, since the latter includes automobile sales, which tend to be quite volatile. The July release was awful, with a decline of -0.8%. This was way off the estimate of +0.1%. The markets are expecting a strong turnaround for the August release, with an estimate of 0.6%. Will the indicator meet or beat this prediction?
  2. Retail Sales: Tuesday, 12:30. Retail Sales also had a weak showing last month, posting a decline of -0.6%. This missed the estimate of -0.3%. The estimate for August stands at a solid gain of +0.6%.
  3. BOC Deputy Governor  Lawrence Schembri Speaks: Tuesday, 16:30.  Schembri will address a financial forum in Ottawa. 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.

* All times are GMT.

USD/CAD Technical Analysis

USD/CAD opened the week at 1.0312 and touched a high of 1.0335. The pair then  fell sharply,  dropping  all the way  to 1.0182, as support at 1.0182 (discussed last week)  held firm.  The pair then  climbed  back up,  closing the week at 1.0303.

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 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.  This line  saw some action earlier this month, but 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 mid-1.03 range.

1.0340  continues to provide  USD/CAD with weak resistance. This line was breached again this week as the pair lost ground before recovering.

1.0250 is the first support level that we encounter. 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. This line remained intact as the Canadian dollar showed some strength in mid-week trading.

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 dollar couldn’t hold onto gains after the Fed non-taper announcement, and strong US releases point to an improving economy which bodes well for the US dollar. Canadian releases were respectable last week, but the US economy continues to outpace its northern neighbor.

Further reading: