USD/CAD forecast: Bears take on fresh 2019 low, target full breakout below 38.2% Fibo


  • USD/CAD continues to extend losses below 200-W EMA following Fed's Powell. 
  • Fed vs BoC remains the driving force behind USD/CAD's downside.

This was the week: 

USD/CAD continues to the downside following the Federal Reserve's move to an easing bias and a rate cut that was rubber-stamped in Federal Reserve Chairman's two-day testimony to Congress during the week. 

Meanwhile, the Bank of Canada remains in neutral and data dependent.  A strong month for industry-level GDP sealed the deal for the Canadian dollar at the end of last month as the data provided evidence that the headwinds weighing on the Canadian economy through Q4/Q1 were indeed transitory. Then the jobs data underscored a bullish backdrop for the economy. The CPI data next week will likely leave the BoC sidelined though which remained something of an outlier this week, maintaining a neutral bias in its policy statement on Wednesday.  For the week ahead, both Canadian CPI/Retail Sales/Manufacturing/Housing data and U.S. Retail Sales are on tap along with more Fed' speakers. 

Key CAD events:

The Candian Consumer Price Index, (CPI/inflation data) is likely to keep the BoC on the sidelines, for now. Indeed, the BoC put greater emphasis on trade tensions and slowing global growth, raising the odds that its next move will be to lower rates - it also has a bit of leeway to hold rates steady while the Fed eases. Meanwhile, the data flow will pick up with the release of several major indicators next week with CPI the most important.

" CPI will get most of the attention with TD looking for a pullback to 2.1% on lower energy prices, while weaker auto sales will weigh on retail sales growth in May. However, industry-level GDP will be supported by a rebound in manufacturing activity which should keep Q2 tracking near 3%,"

analysts at TD Securities explained. 

Next weeks economic is unlikely to build a case for the BoC to follow its global counterparts in the near-term.

GMT
Event
Vol.
Actual
Consensus
Previous
Thursday, Jul 11
12:30
0.0%
 
0.1%
12:30
-0.1%
0.1%
0.0%
Tuesday, Jul 16
12:30
 
 
$-0.19B
12:30
 
 
$-12.8B
Wednesday, Jul 17
12:30
 
 
-0.6%
12:30
 
2.6%
2.1%
12:30
 
0.1%
0.4%
12:30
 
2.1%
2.4%
12:30
 
 
0.3%
12:30
 
0.2%
0.4%
Thursday, Jul 18
12:30
 
 
-16K
Friday, Jul 19
12:30
 
 
0.1%
12:30
 
0.3%
0.1%

Key U.S. events:

Comments from US Fed Chair Powell this week reinforced expectations for a rate cut at the end of July, and we think a follow-up move is likely in September. “Muted” inflation trends give the Fed flexibility to provide a bit more accommodation to offset global growth concerns and a softening US industrial sector (both linked to rising trade tensions). 

Retail Sales are coming up next week along with a series of Fed speakers again, with Retail Sales the most key considering data is more in focus than repeats of the Fed speakers mantra. 

"We expect another increase in sales in the key control group to be the main driver behind a 0.1% headline gain, as consumer fundamentals remain sound. A firm increase in core sales should more than offset both a decline in sales at gasoline stations, which reflects a drop in gasoline prices in June, and a minor retreat in auto sales following a 0.6% increase in May,"

analysts at TD Securities explained. 

GMT
Event
Vol.
Actual
Consensus
Previous
Thursday, Jul 11
21:00
 
 
Friday, Jul 12
12:30
0.3%
0.2%
0.2%
12:30
2.3%
2.2%
2.3%
12:30
1.7%
1.6%
1.8%
12:30
0.1%
0.0%
0.1%
14:00
 
 
17:00
784
 
788
19:30
$17.2K
 
$53.1K
19:30
390.1K
 
392.8K
19:30
$244.8K
 
$258.9K
Monday, Jul 15
12:30
 
0.5
-8.6
15:30
 
 
2.21%
15:30
 
 
2.075%
Tuesday, Jul 16
12:15
 
 
12:30
 
0.3%
0.5%
12:30
 
0.4%
0.4% Revised from 0.5%
12:30
 
0.3%
0.5%
12:30
 
-1.4%
-0.7%
12:30
 
-0.5%
-0.3%
12:30
 
-2.3%
-1.5%
12:30
 
-0.4%
-0.2%
12:55
 
 
-2.2%
12:55
 
 
6.2%
13:15
 
78.1%
78.1%
13:15
 
0.2%
0.4%
14:00
 
0.4%
0.5%
14:00
 
65
64
15:30
 
 
1.985%
17:00
 
 
19:30
 
 
20:00
 
 
$-7.8B
20:00
 
 
$46.9B
20:30
 
 
-8.129M
Wednesday, Jul 17
11:00
 
 
-2.4%
12:30
 
1.9%
-0.9%
12:30
 
 
0.7% Revised from 0.3%
12:30
 
1.265M
1.269M
12:30
 
1.300M
1.299M Revised from 1.294M
14:30
 
-5.642M
-9.499M
18:00
 
 
Thursday, Jul 18
12:30
 
 
1.723M
12:30
 
216K
209K
12:30
 
 
219.25K
12:30
 
5.0
0.3
14:30
 
 
81B
Friday, Jul 19
14:00
 
98.0
98.2
15:05
 
 
17:00
 
 
784
19:30
 
 
$17.2K
19:30
 
 
$244.8K
19:30
 
 
390.1K
20:30
 
 

USD/CAD Technical Analysis

The price is on course for breaking away from below the 38.2% Fibo of the Sep 2017 to date range down at 1.3045. 1.3018 is a fresh low for 2019. 'Funds', (USD/CAD), has surpassed the 200-week moving average while weekly and daily stochastics remain in oversold territory. Prospects to the upside are limited by channel resistance while downside continuation opens 1.2970.

USD/CAD Forecast Poll

The FXStreet forex poll of experts is a sentiment tool that highlights near- and medium-term price expectations from leading market experts and shows a bearish bias near term turning bullish over time.

1 Week
Avg Forecast 1.2997
0.0%100.0%11.0%0-100102030405060708090100110
  • 11% Bullish
  • 89% Bearish
  • 0% Sideways
Bias Bearish
1 Month
Avg Forecast 1.3116
100.0%91.0%56.0%0556065707580859095100
  • 56% Bullish
  • 35% Bearish
  • 9% Sideways
Bias Bullish
1 Quarter
Avg Forecast 1.3198
100.0%90.0%67.0%065707580859095100
  • 67% Bullish
  • 23% Bearish
  • 10% Sideways
Bias Bullish

 

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