USD/CAD Forecast Oct. 17-21

Kenny Fisher MarketPulse

The Canadian dollar rebounded, as USD/CAD dropped 120 points last week. The pair closed at 1.3127. It’s a busy week, with the release of retail sales, CPI and the benchmark interest rate. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

In the US, retail sales were mixed but the Fed meeting minutes have added fuel to expectations of a rate hike in December. There were no major Canadian releases last week.

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

Foreign Securities Purchases: Monday, 12:30. This indicator is linked to currency demand, as foreigners must purchase Canadian dollars in order to buy Canadian securities. In July, the indicator came in at C$5.23 billion, well short of expectations. The August estimate is C$6.24 billion.
Manufacturing Sales: Tuesday, 12:30. This is the first key indicator of the week. In July, the indicator dropped to just 0.1%, well off the forecast of 0.6%. The markets are expecting an improvement in August, with an estimate of 0.3%.
BoC Monetary Policy Report: Wednesday, 14:00. This report is released each quarter. It provides details of the BoC’s view on inflation and economic conditions, and analysts will be looking for clues regarding future monetary policy. A press conference will follow the release of the report.
Overnight Rate: Wednesday, 14:00. The BoC has pegged the benchmark rate at 0.50% since May 2015 and no change is expected in October decision. Still, a dovish rate announcement could push the Canadian dollar lower.
Core CPI: Friday, 12:30. Core CPI has been stagnant, with three straight readings of 0.0%. The markets are predicting a small gain of 0.2% in the September report.
Core Retail Sales: Friday, 12:30. The indicator has not looked good, posting two consecutive declines, missing expectations on each occasion. The estimate for the August release stands at 0.2%.
CPI: Friday, 12:30. CPI has posted two straight declines, pointing to weak inflation levels. The markets are expecting an improvement in August, with an estimate of 0.2%.
Retail Sales: Friday, 12:30. This indicator is the primary gauge of consumer spending. After posting two straight declines of 0.1%, a strong gain of 0.5% is expected in the August report.

USD/CAD opened the week at 1.3248. Late in the week, the pair climbed to a high of 1.3307 but was unable to consolidate at this level and dropped to a low of 1.3096, as support held at 1.3081. The pair closed the week at 1.3127.

Technical lines, from top to bottom

1.3551 has provided resistance since March 2016.

1.3457 was a cap in September 2015.

1.3353 has switched to a support line following sharp gains by USD/CAD last week.

1.3219 was a cap in April.

1.3081 is the next support line.

1.2990 has held firm since early September.

The round number of 1.2900 is next.

1.2763 has been a cap since August. It is the final support line for now.

I remain bullish on USD/CAD

The US economy remains strong and with a December rate hike priced at 60%, monetary divergence continues to favor the US dollar. At the same time, oil prices have been moving up sharply and the Canadian dollar could get a boost if this trend continues.

Interested in USDCAD technicals? Check out the key levels

1. R3 1.3176
2. R2 1.3163
3. R1 1.3153
PP 1.3140
1. S1 1.3129
2. S2 1.3116
3. S3 1.3106

Author

Kenny Fisher

MarketPulse

A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities.

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