USD/CAD Forecast: Price at a critical juncture; Bulls look for a break to the 78.6% Fibo retracement target - 1.3530s


  • USD/CAD retained its bullish bias on the charts and managed to run up to the trendline resistance.
  • USD/CAD is likely to trade between a range of 1.3100/1.4000 for the year.
  • What was very interesting was the Loonie's behaviour around the Fed.

This was the week: Despite the Fed cementing a dovish outlook, the greenback's shirt stayed the cleanest of all dirty shirts

USD/CAD retained its bullish bias on the charts and managed to run up to the trendline resistance by the close of play for the week, and that was despite a more dovish turn out from the Fed; The dollar is still the cleanest of the dirty shirts as investors remain concerned over global growth. What was very interesting was the Loonie's behaviour around the Fed. Despite a pickup in risk appetite following the announcements, the CAD was the laggard in the G10 space as traders remain dubious over the domestic economy and the currency is still unable to befit from external forces. 

Against a fundamental backdrop, which includes, of course, the convictions at the Bank of Canada where the broader slowdown was a critical factor which forced the central bank to remove wording at its last meeting around the need for rates to rise to the neutral range over time, USD/CAD is likely to trade between a range of 1.3100/1.4000 for the year, although the balance of risks implies that the pair will spend the majority of its time this year in a narrower 1.31-1.38 range.

Note: (Analysts at TD Securities explained that domestic demand contracted through H2-2018 and went onto argue, "this, together with the latest disappointment in retail sales data, introduces the risk that January GDP could lean negative. That could drag Q1 GDP into negative territory with it. Accordingly, we can't dismiss the prospect that the economy is already in recession").

Key data events:

Canadian events: Watch GDP

For Canada, Industry-level GDP (Jan) is out on the 29th March where energy sector distortions are expected to overshadow more positive developments and keep industry-level GDP unchanged in January.  However, consecutive declines into year-end will keep Q1 growth tracking below BoC projections (+0.8%).

Latest CAD events and next week's calendar: 

GMT
Event
Vol.
Actual
Consensus
Previous
Thursday, Mar 21
12:30
0.6%
0.5%
0.3%
n/a
36.2K
 
35.4K
Friday, Mar 22
12:30
1.5%
1.2%
1.5%
12:30
0.7%
0.1%
0.3%
12:30
0.2%
 
0.2%
12:30
1.5%
1.4%
1.4%
12:30
0.7%
0.6%
0.1%
12:30
0.1%
0.2%
-0.8% Revised from -0.5%
12:30
-0.3%
0.4%
-0.3% Revised from -0.1%
Wednesday, Mar 27
12:30
 
$-2.80B
$-4.59B
12:30
 
 
$50.9B
12:30
 
 
$46.31B
Friday, Mar 29
12:30
 
 
3.8%
12:30
 
 
-0.3%
12:30
 
 
-0.1%

US events: Fed speakers and PCE

As for the US, there will be a number of Fed speakers, featuring no fewer than 14 public comments from 10  officials. While the Fed has communicated quite clearly that there will not be a rate hike this year, it will still be worth tuning into to the hawkish leaning voters such as Evans, Rosengren and George o see if they still argue for a tighter policy this year. From data, PCE (Jan) will be in focus where expectations for core inflation are for a 0.2% m/m pace and leaving the annual rate slightly below 2% for a fourth straight month. 

All in all, a less busy schedule next week but it will also be worth keeping a watchful eye on technical developments in global oil prices on the charts (dropping back towards a critical support area ($57.85/95 WTI from the 4-month highs scored earlier in the week). There is currently a tug of war between an appetite from producers hedging at current prices, capping the price of oil and mammoth draws in the US which have been supporting domestic crude prices and narrowing the WTI-Brent spread. 

Latest USD events and next week's calendar: 

GMT
Event
Vol.
Actual
Consensus
Previous
Friday, Mar 22
13:45
54.3
55.2
55.5
13:45
52.5
53.6
53.0
14:00
1.2%
0.2%
1.1%
14:00
11.8%
2.2%
-1.4% Revised from -1.2%
14:00
5.51M
5.10M
4.93M Revised from 4.94M
17:00
824
 
833
18:00
$-234B
$-227B
$9B
19:30
 
 
$-66.9K
19:30
 
 
$78.8K
19:30
 
 
362.3K
Monday, Mar 25
01:45
 
 
06:00
 
 
10:30
 
 
12:30
 
 
-0.43
14:30
 
7.0
13.1
16:30
 
 
2.41%
16:30
 
 
2.45%
Tuesday, Mar 26
00:30
 
 
12:30
 
1.235M
1.230M
12:30
 
1.320M
1.317M Revised from 1.345M
12:30
 
-28.3%
18.6%
12:30
 
-0.60%
-1.76% Revised from 1.40%
12:55
 
 
4.9%
12:55
 
 
-0.1%
13:00
 
3.9%
4.2%
13:00
 
0.3%
0.3%
14:00
 
 
14:00
 
 
16
15:30
 
 
2.47%
18:00
 
 
2.503%
20:30
 
 
-2.133M
Wednesday, Mar 27
11:00
 
 
1.6%
12:30
 
$-57.5B
$-59.8B
12:30
 
 
$-80.39B Revised from $-79.49B
14:30
 
0.309M
-9.589M
15:00
 
$-132.0B
$-124.8B
18:00
 
 
2.489%
21:30
 
 
Thursday, Mar 28
11:15
 
 
12:30
 
225K
221K
12:30
 
 
1.75M
12:30
 
1.8%
2.0%
12:30
 
2.4%
2.6%
12:30
 
 
1.5%
12:30
 
1.7%
1.7%
13:30
 
 
14:00
 
-1.8%
-2.3%
14:00
 
-1.0%
4.6%
14:30
 
-125B
-47B
15:00
 
 
-4
16:30
 
 
2.47%
18:00
 
 
2.538%
21:20
 
 
Friday, Mar 29
12:30
 
 
1.9%
12:30
 
 
0.1%
12:30
 
0.3%
-0.5%
12:30
 
0.3%
-0.1%
12:30
 
 
1.7%
12:30
 
 
0.2%
13:45
 
57.0
64.7
14:00
 
 
97.8
14:00
 
0.617M
0.607M
14:00
 
1.6%
-6.9%
16:05
 
 
17:00
 
 
824
19:30
 
 
19:30
 
 
19:30
 
 

USD/CAD Technical Analysis

Further to last week's analysis, where USD/CAD was presumed bullish while above the weekly Ichimoku Cloud, the Loonie was indeed faded around the 38.2% Fibo of the late Dec highs and late Jan lows.  Bulls subsequently picked up the pair at a discount just below the 1.33 the figure for an attack through the 50% Fibo which drew in further demand on dips towards the 61.8% Fibo and trend line resistance and just shy of the early March 1.3450/60 swing high territory. 

At this juncture, it's make-or-break time:

As can be seen on the chart below, one of the key characteristics of the Ichimoku Cloud identified is the trajectory of the Lagging Span which has been enlarged and painted white on this daily chart - When the Lagging Span crosses above the cloud, (Lead 1), as it is already starting to do, it will signify that the force is strong with the bulls as price moves above the 61.8% Fibo and through trendline resistance:

Bulls will then look to the 78.6% Fibo in the 1.3530s. As can be seen below, all the criteria for a long play have been met on this daily chart:

Bullish Ichimoku strategy:

  • Price must close above the Cloud.
  • Cloud ahead must be bullish (green).
  • Conversion Line is greater than the baseline.
  • Lagging Span is greater than or crosses above the cloud. 

However, should the bears step in, which could come as a result of a corrective spike in the price of oil, the risk is back towards the 38.2% Fibo and a subsequent break there will bring in the 23.6% Fibo and trendline support where a break out opens risk back to 1.3070 support and 1.2780 below there. 

USD/CAD Sentiment

The FXStreet forex poll of experts is a sentiment tool that highlights near- and medium-term price expectations from leading market experts and it shows a bearish outlook on a forward basis.

"The Greenback is likely to aim lower towards a support level at 1.3308 during next week's trading session," by Dukascopy Bank Team | 

 
1 Week
Avg Forecast 1.3449
100.0%90.0%60.0%06065707580859095100
  • 60% Bullish
  • 30% Bearish
  • 10% Sideways
Bias Bullish
1 Month
Avg Forecast 1.3346
100.0%76.0%24.0%02030405060708090100
  • 24% Bullish
  • 52% Bearish
  • 24% Sideways
Bias Bearish
1 Quarter
Avg Forecast 1.3206
100.0%83.0%15.0%0102030405060708090100
  • 15% Bullish
  • 68% Bearish
  • 17% Sideways
Bias Bearish

 


BOC NEWS & ANALYSIS

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD remains depressed but off daily lows

The EUR/USD pair is recovering from a daily low of 1.1216, although holding in negative territory for the day. US preliminary Michigan Consumer Sentiment Index improved by less-than-anticipated in July, coming in at 98.4 vs. the 98.5 expected.

EUR/USD News

GBP/USD trading marginally lower daily basis but above 1.2500

The Pound gave back some of its Thursday’s gain on dollar’s relief. The GBP/USD pair broke a daily descendant trend line coming from June’s high and holds above it, leaving little room for sellers to act.

GBP/USD News

USD/JPY: bears pausing, still in control

Japanese National Inflation steady at 0.7%YoY in June. US Michigan Consumer Sentiment Index expected at 98.5 in July. USD/JPY corrective advance falling short of signaling an interim bottom in place.

USD/JPY News

Something has spooked the Fed

We wish we knew what it is. Wild talk of the US joining Japan and Europe with zero or negative return on the 10-year is or should be very frightening.

Read more

Gold consolidates around $ 1440, eyes US data for fresh direction

Gold (futures on Comex) extends its side-trend around the 1440 mark into the mid-European session, having stalled its retreat from 2019 highs of 1454 near 1437 region.

Gold News

Majors

Cryptocurrencies

Signatures