USD/CAD forecast: Bulls step in at key support and target 1.3380s ahead of the Fed


  • USD/CAD ends higher on the week ahead of the Federal Reserve next week.
  • CAD recovers from critical support/resistance 61.8% Fibo confluence.

This was the week: 

The positive sentiment surrounding US and Chinese trade relations continued to support global equities and risk-on assets, although oil failed to benefit from the optimism on various supply-side fundamentals and subsequently weighed on the value of the Loonie. Funds rose on the week, climbing from the 1.3134 lows to a high of 1.3286. However, with a focus now turning to the Federal Reserve, markets will be reminded that the Bank of Canada is comfortable with its more neutral than the expected stance taken last week which could ultimately lead to a lower Funds, dependent on expectations for an additional rate cut from the Fed as soon as October. 

Key CAD events:

Retail Sales will be on the cards as well as inflation data. The main focus will be on headline inflation that is expected to edge lower to 1.7% y/y as weaker gasoline prices contribute to a 0.3% m/m decline. Airfares will add another source of downside on a partial correction of the 14% gain in July, while the Bank of Canada's core measures are expected to hold at 2.0% y/y on average," TD Securities. 

 

GMT
Event
Vol.
Actual
Consensus
Previous
Thursday, Sep 12
12:30
-0.4%
 
-0.2%
12:30
-0.1%
0.0%
-0.1%
Monday, Sep 16
12:30
 
 
$6.61B
12:30
 
 
$-3.98B
Tuesday, Sep 17
12:30
 
-1.7%
-1.2%
Wednesday, Sep 18
12:30
 
 
2%
12:30
 
 
0.3%
12:30
 
1.7%
2.0%
12:30
 
 
0.3%
12:30
 
0.2%
0.5%
Thursday, Sep 19
12:30
 
 
73.7K
Friday, Sep 20
12:30
 
0.4%
0.9%
12:30
 
0.8%
0.0%

Key U.S. events:

US headline August CPI matched consensus expectations with a 0.1% m/m gain, however, core inflation exceeded expectations once again, rising 0.3% m/m. The data failed to support the Dollar as the focus remains on growth and inflation in a downturn is hardly positive which the Federal Reserve is likely to consider when deciding upon interest rates next week. US retail sales, however, were encouraging and rose more strongly than expected in August, posting a 0.4% month-on-month gain versus the 0.2% consensus expectation.

"July’s growth rate was also revised up by a tenth of a percentage point. The report again underlines the point that while not everything is rosy in the US economy, overall it remains some way off recession and market expectations for aggressive Federal Reserve policy stimulus may be misplaced. Together with yesterday’s inflation data, it takes the already remote prospect of a 50bp rate cut next week firmly off the table," analysts at ING Bank explained. 

Looking ahead fo the week, indeed, the Fed is in focus and is expected to lower rates by 25bp again next week and leave the door open to further easing. "The dot plot should reflect a number of FOMC voters projecting 75bp of total easing for this year, but not enough to move the median lower to that level. Presidents George and Rosengren should dissent again at the meeting," analysts at TD Securities said. 

GMT
Event
Vol.
Actual
Consensus
Previous
Friday, Sep 13
12:30
-1.4%
 
-0.9%
12:30
0.3%
0.3%
0.9% Revised from 1.0%
12:30
0.4%
0.2%
0.8% Revised from 0.7%
12:30
0.0%
0.1%
1.0%
14:00
0.4%
0.3%
0.0%
14:00
92.0
90.9
89.8
17:00
733
 
738
19:30
$269.7K
 
$300.5K
19:30
428.2K
 
384.2K
19:30
$-16.4K
 
$12.3K
Monday, Sep 16
12:30
 
4.55
4.80
15:30
 
 
1.92%
15:30
 
 
1.825%
Tuesday, Sep 17
12:55
 
 
6.4%
12:55
 
 
-0.4%
13:15
 
77.6%
77.5%
13:15
 
0.2%
-0.2%
14:00
 
66
66
20:00
 
 
$1.7B
20:00
 
 
$32.9B
21:30
 
 
-7.2M
Wednesday, Sep 18
11:00
 
 
2%
12:30
 
 
8.4%
12:30
 
 
-4%
12:30
 
1.250M
1.191M
12:30
 
1.300M
1.336M
14:30
 
 
-6.912M
18:00
 
 
18:00
 
 
18:00
 
2.00%
2.25%
18:30
 
 
Thursday, Sep 19
12:30
 
$-125.7B
$-130.4B
12:30
 
 
204K
12:30
 
 
212.5K
12:30
 
 
1.67M
12:30
 
12.0
16.8
14:00
 
5.40M
5.42M
14:00
 
2.5%
2.5%
14:30
 
 
78B
Friday, Sep 20
17:00
 
 
733
19:30
 
 
428.2K
19:30
 
 
$269.7K
19:30
 
 
$-16.4K

USD/CAD Technical Analysis

Funds recovered from the 61.8% Fibonacci target in the 1.3150s and headed back towards the 200-day moving average and confluence of a 23.6% Fibo which bulls need to overcome. 1.3350 is the near-term target to break still on the upside which guards the 1.34 handle and mid-June highs. Bears will otherwise be targetting the July lows just ahead of 1.30 the figure which guard a run to the 1.28 handle and a 161.80% fibo extension.

USD/CAD daily chart

 


 

USD/CAD Forecast Poll

1 Week
Avg Forecast 1.3276
100.0%90.0%50.0%04550556065707580859095100105
  • 50% Bullish
  • 40% Bearish
  • 10% Sideways
Bias Bullish
1 Month
Avg Forecast 1.3225
0.0%100.0%46.0%0-100102030405060708090100110
  • 46% Bullish
  • 54% Bearish
  • 0% Sideways
Bias Bearish
1 Quarter
Avg Forecast 1.3256
100.0%58.0%29.0%030405060708090100
  • 29% Bullish
  • 29% Bearish
  • 42% Sideways
Bias Sideways

 

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