USD/CAD Forecast Oct. 31 – Nov. 4

The Canadian dollar posted slight losses last week, closing just under the 1.34 line. This marked its lowest weekly close since March. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

In the US, durable goods orders were mixed. Advance GDP beat expectations at 2.9%, but the internals were mixed. UoM Consumer Sentiment dropped to its lowest level since September 2015 and missed expectations. There were no major releases out of Canada last week.

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

1. RMPI: Monday, 12:30. RMPI measures inflation in raw materials purchased by manufacturers. The index has posted two straight declines, as Canada continues to struggle with low inflation levels.

2. GDP: Tuesday, 12:30. GDP is one of the most important economic indicators and an unexpected reading can have a sharp effect on the movement of USD/CAD. The monthly indicator posted a gain of 0.5% in August, but is expected to drop to 0.2% in the September report.

3. RBC Manufacturing PMI: Tuesday, 13:30. This minor indicator continues to post readings just above the 50-point level, indicative of a stagnant manufacturing sector. In September, the index dipped to 50.3 points, well short of the estimate of 51.5 points.

4. BoC Governor Stephen Poloz Speaks: Tuesday, 16:00. Poloz will speak at an event in Vancouver. The markets will be looking for any clues regarding future BoC monetary policy.

5. BOC Senior Deputy Governor Carolyn Wilkins Speaks: Wednesday, 17:30. Wilkins will deliver remarks at an event in Toronto.

6. BoC Governor Stephen Poloz Speaks: Friday, 00:35. Poloz will deliver remarks in Oshawa. A speech that is more hawkish than expected is bullish for the Canadian dollar.

7. Employment Rate: Friday, 12:30. This key indicator should be treated as a market-mover. The economy added 67.2 thousand jobs in September, crushing the forecast of 8.5 thousand. However, the markets are bracing for a sharp downturn in October, with an estimate of -10.0 thousand. The unemployment rate is expected to remain unchanged at 7.0%.

8. Trade Balance: Friday, 12:30. Trade Balance is closely monitored, as it is linked to currency demand. Canada’s trade deficit narrowed to C$1.9 billion in August, smaller than the estimate of a deficit of C$2.5 billion. The positive trend is expected to continue in September, with the deficit expected to drop to C$1.7 billion.

9. Ivey PMI: Tuesday, 14:00. Ivey PMI tends to show significant volatility from month to month. The indicator jumped to 58.4 points in September, well above the forecast of 53.0 points.

USD/CAD opened the week at 1.3351 and quickly dropped to a low of 1.3275. USD/CAD then reversed directions and posted small gains over the course of the week. The pair touched a high of 1.3433 as resistance remained firm at 1.3457. USD/CAD rebounded late in the week, climbing to a high of 1.3355. The pair closed the week at 1.3391.

Technical lines, from top to bottom

We start with resistance at 1.3813. This line was a cushion in January and February.

1.3672 is next.

1.3551 has provided resistance since March.

1.3457 was a cap in September 2015. It held firm in resistance last week.

1.3353 is a weak support line. It could see action early next week.

1.3219 was a cap in April.

1.3081 is the next support line.

1.2990 has held firm since early September. It is the final support level for now.

I remain bullish on USD/CAD

A weak Canadian GDP could add to the loonie’s woes next week. As well, positive sentiment towards a Fed rate hike in December is bullish for the US dollar.

Interested in USDCAD technicals? Check out the key levels