USD/CAD forecast: Technicals lean bearish ahead of key data points
- USD/CAD edging lower below 200-DMA/rejected at 61.8% Fibo and piercing back below the 38.2% Fibo.
- CAD remains robust in Bank of Canada sentiment.
- Forex poll offers a bullish bias for USD/CAD over near to longer-term forecasts.
USD/CAD is seeking a break to the downside and out of the September consolidation between a 50 and 38.2% Fibonacci retracement zone, capped by the 200-day moving average. Bears seek a test of the rising support line for territories below the 1.32 handle. Fundamentals will boil down to central bank sentiment when analysing the key economic data from both the US and Canada next week. Should the US Dollar find a bid on strong US jobs numbers, then the central bank trade will be nullified and funds can target a break beyond 1.33.
This was the week:
Oil prices stablised on the reports of a speedy recovery in Suadi supply, and when combined with sustained fears of waning demand growth, WTI, highly correlated to CAD, dropped below $55bbls which supported funds for the best part of the week. For Donald Trump, it was a week to forget considering the impeachment inquiry into his call with the president of Ukraine.
Key CAD events:
Looking ahead, we have key industry level Gross Domestic Produce which could slow to 0.1% m/m in July. "Most of the weakness can be traced to the goods sector, including a sharp pullback in manufacturing and weaker energy production, leaving services to drive growth. A 0.1% print would leave Q1 growth tracking in the low 1% range, slightly below BoC estimates from July," analysts at TD Securities argued.
Key U.S. events:
As for the US, we have the highly anticipated Nonfarm Payrolls event as well as ISM Manufacturing. "We expect payrolls to increase by 150k in September, following the below-consensus 130k August print. Jobs in the goods sector should remain soft, while we look for a modest rebound in services," analysts at TD Securities explained, who look for wages to rise 0.2% m/m, leaving the annual rate unchanged at 3.2% y/y. As for the ISM data, markets are looking for a modest rebound - "We expect easing trade tensions to have marginally boosted business sentiment in September," analysts at TD Securities argued.
USD/CAD Technical Analysis
USD/CAD remains capped by the 200-day moving average and a confluence of the 50% Fibonacci mean reversion of the July rally to September highs, accumulated around 1.33 the figure. Should bulls get above this barrier, then eyes will be on 1.34 handle and mid-June highs. On this break below the 21-DMA, bears are looking for a test of trend line support which will open prospects for the July lows just ahead of 1.30 the figure which guard a run to the 1.28 handle and a 161.80% Fibo extension.
USD/CAD daily chart
USD/CAD Forecast Poll
The Forex Forecast Poll is a sentiment tool that highlights near- and medium-term price expectations from leading market experts which shows a bullish bias for USD/CAD.
The USD/CAD is about to get squeezed in by the resistance of the 200-day SMA and the support of the 55-day SMA. Short term movements are overtaking long term trend. Watch for a break out.
Author
Ross J Burland
FXStreet
Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.
