For the second straight week, the Canadian dollar was almost unchanged and closed the week just above the 1.03 level. This week’s highlights include GDP and Ivey PMI. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
Canadian Core Retail Sales was strong, but the Canadian dollar failed to take advantage. US Unemployment Claims looked sharp, but key manufacturing and housing releases disappointed.
- GDP: Monday, 12:30. Unlike the US and other major countries, Canada releases its GDP on a monthly basis. The July release looked awful, declining 0.6%. This missed the estimate of -0.5% and was the first decline since February. The markets are expecting a strong turnaround for the August release, with an estimate of a gain of 0.6%. Will the indicator meet or beat this rosy prediction?
- RMPI: Tuesday, 12:30. The Raw Materials Price Index measures inflation facing manufacturers. RMPI unexpectedly shot up 4.2% in July, its highest level since April 2011. This was well above the estimate of 1.2%. Another sharp rise is expected for August, with an estimate of 3.2%.
- BOC Senior Deputy Governor Tiff Macklem Speaks: Tuesday, 16:30. Macklem will address the Economic Club in Toronto. Analysts will be looking for clues regarding the BOC’s future monetary policy, ahead of the BOC’s rate announcement in late October.
- Ivey PMI: Friday, 14:00. This key indicator has dropped below the 50-point level only once in 2013, indicative of ongoing expansion. The index came in at 51.0 points in July, and the markets are expecting a stronger reading in August, with an estimate of 52.6 points.
* All times are GMT.
USD/CAD Technical Analysis
USD/CAD opened the week at 1.0299 and touched a low of 1.0268. The pair reached a high at the resistance line of 1.0340 (discussed last week), and closed the week at 1.0303.
Live chart of USD/CAD: [do action=”tradingviews” pair=”USDCAD” interval=”60″/]
Technical lines, from top to bottom:
We begin 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 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 low-1.03 range.
1.0340 is a weak resistance line. This pair touched this line as the pair lost pushed upwards before retracting.
USD/CAD is receiving support at 1.0250. 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. 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.
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 neutral on USD/CAD
USD/CAD has been staying close to the 1.03 line, and the pattern could continue this week. A threatened shutdown of the US government could hurt the US dollar, but chances are that cooler heads will prevail in Washington and some compromise will be hammered out between the politicians.
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- USD/CAD (loonie), check out the Canadian dollar.