USD/CAD Forecast March 14-18

The Canadian dollar posted strong gains for a third straight week, gaining about 130 points against the US dollar. USD/CAD closed the week at the 1.32 line and is trading at its lowest level since early November. This week’s highlights are Manufacturing Sales, CPI and Retail Sales. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

The BoC maintained interest rates at 0.50% and sounded cautiously optimistic about the economic conditions. The Canadian dollar shrugged off soft employment numbers, as Employment Change declined and the unemployment rate edged higher. In the US, Unemployment Claims looked sharp, dropping to 259 thousand.

Updates:

USD/CAD daily graph with support and resistance lines on it.

1. Manufacturing Sales: Wednesday, 12:30. The week kicks off with this key indicator. In January, the indicator posted a strong gain of 1.2%, ahead of the estimate of 0.9%.

2. Foreign Securities Purchases: Wednesday, 12:30. The indicator reversed in January and posted a decline of C$1.41 billion, but this beat the forecast of C$6.05 billion.

3. Wholesale Sales: Thursday, 12:30. Wholesale Sales is a leading indicator of consumer spending, a key engine of economic growth. The indicator improved in December with a gain of 2.0%, crushing the estimate of 0.1%.

4. Core CPI: Friday, 12:30. This key indicator should be treated as a market-mover. The index rebounded in December with a gain of 0.3%, within expectations. The upward trend is expected to continue in January, with an estimate of 0.5%.

5. Core Retail Sales: Friday, 12:30. Core Retail Sales excludes the most volatile items which comprise Retail Sales. The indicator came in at -1.6% in December, well short of the estimate of -0.5%. The markets are expecting better news in January, with the estimate standing at 0.7%.

6. CPI: Friday, 12:30. CPI is the primary gauge of consumer spending. The index improved in January after two straight declines, posting a modest gain of 0.2%. This beat the forecast of 0.0%. Another reading of 0.2% is anticipated in the February release.

7. Retail Sales: Friday, 12:30. Retail Sales slipped badly in December, posting a decline of 2.2%, compared to an estimate of a 0.7% decline. The markets are expecting better news in January, with a forecast of 0.8%.

USD/CAD Technical Analysis

USD/CAD opened the week at 1.3335 and touched a high of 1.3446, as resistance held firm at 1.3457. The pair then reversed directions and dropped to a low of 1.3164. USD/CAD closed the week at 1.3202.

Technical lines, from top to bottom

1.3620 is a strong resistance line.

1.3457 held firm as USD/CAD posted gains before retracting.

1.3353 is the next line of resistance.

1.3213 was tested in support and is a weak line. It could see further action early in the week.

13174 was a cap in October 2015.

1.3064 is protecting the symbolic 1.30 line.

The round number of 1.2900 was a cushion in October.

1.2780 is the final support line for now.

I am bearish on USD/CAD

The Canadian dollar continues to climb, buoyed by a rise in oil prices and renewed investor confidence about global economic conditions. There is even talk that the BoC might raise interest rates in 2016. In the US, the Fed is unlikely to raise rates next week, given some softness in the US economy.