|

USD/CAD Forecast: CAD continues climbing on NAFTA, all eyes on the jobs report

  • The Canadian Dollar continues enjoying progress on NAFTA talks.
  • The main event of the week is the Canadian jobs report.
  • The technical picture looks bearish on the USD/CAD but the medium and long-term bias on the FX Poll is bullish.

This was the week: NAFTA and GDP help

The Canadian Dollar continued getting a boost from the talks on the North American Free Trade Agreement (NAFTA). While most progress has been made on the US-Mexican front, a full NAFTA deal will undoubtedly remove the dark clouds from the Canadian economy and the currency..

In addition, Canadian monthly GDP for May rose by 0.5%, above expectations. The economy is finally enjoying a spring bounce. 

In the US, the Fed left the interest rate unchanged and slightly upgraded its wording on the economy. A rate hike in September is on the cards. Worsening trade relations between the US and China pushed the greenback higher against some currencies, but not against the C$. 

Canadian events: Jobs report closely watched

The week begins with the Ivey Purchasing Managers' Index which carries expectations for another increase on high ground. Housing starts, which have been upbeat, will likely drop from the highs. The New House Price Index (NHPI) is also of interest. 

However, the best is kept for last: the jobs report. After two months of job losses, Canada enjoyed a significant increase in jobs in June: 31,800. Another meaningful rise is on the cards and the unemployment rate is expected to drop from 6% seen last time. Any change in the jobless rate should be measured against changes in the participation rate. The composition of jobs and wages could also play a role if the headline figure comes out within expectations.

Here is the Canadian calendar for this week.

Canadian economic gauges August 6 10 2018

US events: Inflation eyed 

After the Fed and the Non-Farm Payrolls, the US calendar is lighter now. The Producer Price Index is of interest after reaching high levels. It also serves as a warm-up towards Friday's big event: the Consumer Price Index.

Core CPI, which is of interest to the Federal Reserve, accelerated to 2.3% YoY in June. The same level is forecast for July. Any faster pace could make the case for a faster pace of rate hikes. A drop would be disappointing. 

Here are the critical American events from the forex calendar: 

US macro events August 6 10 2018

USD/CAD Technical Analysis

The pair dropped below the 50-day Simple Moving Average, a bearish sign. It still trades significantly above the 200-day SMA. The Relative Strength Index (RSI) and Momentum are only marginally down. All in all, the bias is very slightly bearish.

1.2970 was the low point at the wake of August. Further down, 1.2860 was a swing low in early June. Lower, 1.2730 supported the pair back in May.

The USD/CAD has some resistance at 1.3100 that separated ranges in July and is also a round number. 1.3220 capped the pair in mid-July and stronger resistance awaits at 1.3295 which held the USD/CAD down later in the month. 

USD CAD daily chart August 6 10 2018

USD/CAD Sentiment

While Trump is quite unpredictable, a crisis in NAFTA talks seems to have lower chances than further progress. A deal that sidelines Canada may weigh on the loonie but this also seems unlikely, at least now. Under these circumstances and with an improving Canadian economy, there is room for the C$ to rise and the USD/CAD to fall.

The FXStreet forex poll of experts shows a neutral tendency in the short term but bullish in the medium and longer terms. The bias has become more bullish in the medium and longer terms. 

USD CAD FX Poll August 2018 technical

Related Forecasts

Author

Yohay Elam

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

More from Yohay Elam
Share:

Editor's Picks

AUD/USD turns south toward 0.6900 as USD firms up

AUD/USD sees fresh selling and drops toward 0.6900 in late Asian trading on Monday, as renewed US Dollar strength weighs on the pair amid lingering Middle East and Russia-Ukraine geopolitical tensions. Focus remains on Oil prices, Treasury bond yields, and RBA expectations for fresh trading impetus in the major.

USD/JPY retakes 158.00 amid hawkish BoJ bets, firmer USD

USD/JPY erases losses and retakes 158.00 in the Asian session on Monday, trading within a one-week-old range. Geopolitical uncertainty continues to underpin the US Dollar, despite fading Fed rate hike hopes, supporting the pair's rebound. However, further upside could be capped by hawkish BoJ expectations and looming intervention risks that could support the Japanese Yen.

Gold languishes below $4,200 amid high US yields

Gold trims some losses on Monday, but remains trapped within previous ranges, with upside attempts limited below $4,200 and with two-month lows of $4,110 at a short distance. The recent pullback on the US Dollar Index has provided some support for precious metals although the high US Treasury yields are keeping a floor on US Dollar dips so far.

Pi Network risks a steeper decline as bearish momentum builds

Pi Network extends losses below $0.090 maintaining a steady decline for the fifth consecutive day. The retail demand remains firm, with the notional value of active perpeutals holding above $10 million. The technical outlook for PI remains bearish as bearish momentum mounts.

ISM Services PMI expected to show robust US economy in September

The US ISM Services PMI is expected to improve marginally in September. The US services sector is expected to remain well into expansionary territory. Bets of further Fed tightening appear to have lost traction in the last few days.

The Euro is near a one-year low: Inflation could trigger its rebound, not its fall

EUR/USD has fallen to its lowest level since May 2025. The pair hit 1.1312 on Wednesday and trades well below the January peak of 1.2082. The decline reflects a powerful combination of US Dollar strength, geopolitical uncertainty and renewed concerns about Europe's exposure to higher energy prices.