USD/CAD Forecast: Crude helps CAD keep calm, retail sales eyed

This was the week: Rising oil, hopes for a deal

The Canadian calendar was light and allowed the price of petrol to take center stage. There were no dramatic movements, but the black gold extended its gains, boosting the C$. Reports that OPEC and its allies are fulfilling their pledges to cut production and the ongoing political crisis in Venezuela kept oil bid. 

Another factor boosting the loonie and weighing on the US Dollar came from optimism about trade talks between the US and China. Reports that the trade truce may be extended by an additional 60 days encouraged markets. China also contributed with a piece of good news: exports and imports both rose in January.

The greenback did gain against major currencies amid their issues but dropped against commodity currencies that advanced alongside the better mood in stocks.

US core inflation beat expectations with 2.2% YoY and Fed officials were mixed in their views.

Canadian events: Retail sales and rising oil

The ADP Non-Farm Payrolls report for January is of interest as another tracker of the labor market, and it will likely be upbeat after the official figure beat expectations. Wholesale sales are also of interest. 

The primary event is on Friday. Canadian retail sales have probably bounced back in December after a disappointing November. Back in the month of Black Friday, retail sales fell by 0.9%, and the figure excluding autos did not excel either: a retreat of 0.6%. The data is critical for the Q4 GDP due in the following week.

Earlier in the week, oil may continue playing a crucial role. Can crude continue climbing? Many doubt the potential for further gains as the global slowdown may weigh on demand. 

Here is the Canadian calendar for this week:

US events: Fed focus again 

Apart from ongoing trade talks, the FOMC Meeting Minutes stand out. They are set to provide more detail on the January decision in which the Fed took a dovish twist. We may learn more about the members' inclinations to pause the rate hike cycle and also respond to markets and open the door to changes in the balance sheet reduction program. It will be interesting to hear if there were calls for a rate cut. 

On Thursday, we will get the belated durable goods orders data for December, which feeds into the GDP data in the following week.

Here are the critical American events from the forex calendar: 

USD/CAD Technical Analysis

Dollar/CAD is quite balanced after a week of trading in a range, albeit a broad one. The Relative Strength Index is balanced and Momentum is nowhere to see. The pair trades between the 50 and 200 Simple Moving Averages. All in all, the technical picture is quite neutral. 

Resistance awaits at 1.3330 which capped the pair early in February and provided support in early December. 1.3375 was the high point in January and almost perfectly converges with the 50-SMA. 1.3425 was a swing low in December and works as a cap on USD/CAD. 1.3580 and 1.3660 are next.

Some support awaits at 1.3230 which provided support in mid-January and also in mid-February. The week's low of 1.3200 is also a round number and serves as another line of defense after 1.3200. 1.3135 was a critical support line in November and is followed by 1.3070, which is the 2019 low. 1.2970 dates back to the autumn.

USD/CAD Sentiment

While the loonie showed a lot of resilience in the face of a stronger greenback, this may not last for too long. It will need an upbeat retail sales number to hold onto its ground amid a global slowdown.

The FXStreet forex poll of experts shows a bullish trend in the short term, sideways in the medium term, and bearish afterward. The targets have all been downgraded in the past week.

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