Currency analyst

USD/CAD outlook for October 10-14

This week didn’t send any shockwaves to the technical chart of the USD/CAD (well, until Friday). Crude oil futures settle at $50 per barrel. USD/CAD is usually responsive to these sprouts of life. However, this time it was ignoring higher oil prices. Normally Canadian dollar would gain, because Canadian economy relies on the robust oil industry.

This ran against the normal reaction of CAD, because the Canadian economy is reliant on a robust oil industry.

On Tuesday we heard a BOC Senior Deputy Governor Carolyn Wilkins speaking of the Canadian economy and monetary policy trends.  She said that the bank is ready to provide monetary stimulus in order to meet its inflation target. Wilkins admitted that Canadian economy is now experiencing tough time struggling with global events of a Brexit like nature, the collapse in oil prices. It has also been affected by headwinds from the European debt crisis, global financial crisis, but now there has been progress, since the risks of the inflation have been offset. Wilkin’s encouragement a bit contradicts the Monday data that we got from Canada. Canadian manufacturers signaled another slowdown in growth momentum in September.  Then, we cheered up as the building permits data – a key indicator of demand in housing market – has been much better than expected; and the trade balance showed a narrower deficit. But, surprisingly, all these data didn’t add a bit of spice into the technical picture of the USD/CAD.

The USD/CAD experienced a significant swing only when Canadian employment numbers came out stronger than expected; and long-awaited FNP fell short of the expectations. The key level is 200-day MA at the 1.3210. There’s also 6-month resistance line at 1.3290. If “bulls” don’t gain momentum, the quotes may move until we get some prompts from the FOMC officials about their decision on the interest rates. The next support line for US dollar is lying against 50-day MA at 1.3065. A breakout of the resistance line at 1.3290 will open the way up to 1.3350/1.3400.

Next week we would recommend you to focus on the new housing price index coming on Tuesday. It’s a leading indicator of the housing industry's health which positively influences the economic growth. And after this report we won’t get any significant data releases from Canada. As it has been already mentioned; all our attention will be concentrated on the FOMC meeting minutes on Wednesday, on a bunch of the US key statistic indicators (unemployment claims, import prices, core retail sales, producer price index) and Janet Yellen’s speech at the end of the week. 

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