USD/CAD Weekly Forecast March 6-10

USD/CAD posted impressive gains in the past week as the pair rallied for four consecutive sessions prior to retreating on Friday to end off the week. The loonie was the second worst performer versus its major counterparts for the week, falling slightly behind the Kiwi dollar on the decliners list.

The weekly gain in USD/CAD was the largest since the first week of May 2016 when the Alberta wildfires triggered a sharp drop in the Canadian currency.

A stronger US dollar attributed to gains as the greenback rose on the back of a signal for a March rate hike from the Federal Reserve. Comments from Fed officials throughout the week hinted that rates should be hiked sooner than later. Fed chair Yellen confirmed on Friday that March was a live meeting and that an increase would occur as long as economic progress towards objectives continued. The stipulation puts a spotlight on the US jobs report which is scheduled for release on Friday.

The Bank of Canada retained a cautious tone at their meeting this past week. Recent gains in inflation were considered temporary and while labor data showed improvement in the latest report the central bank indicated that subdued wage growth pointed to persistent economic slack.
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USD/CAD Edges Higher As The Dollar Recovers

USD/CAD showed strength in the prior week as the pair posted four consecutive daily gains prior to a small decline to end off the week. Friday’s decline led to a bearish shooting star print on a daily chart but despite the reversal candlestick pattern selling pressure has not been seen in the pair as of yet.

The US dollar index (DXY) was under pressure at the weekly open but reversed higher shortly after the European open and has erased about half of Friday’s losses. The index remains at risk of a further decline nevertheless as Friday’s declined printed a bearish candle that engulfed the prior two sessions. The bearish implication of the candlestick pattern suggests that rallies in the index will be sold.

WTI crude oil prices remain little changed on the day as a rally in early European trading was met with sellers in the North American session. WTI crude (USOIL) was last seen at $53.17 from its prior close of $53.13. A weaker dollar on Friday had pushed prices higher to snap a prior five-day losing streak but today’s price action suggests a slowing of upside momentum.


February 2017 Canadian Ivey PMI 55.0 vs 58.5 exp SA

February 2017 Canadian Ivey manufacturing PMI report 7 March 2017

  • NSA 55.1 vs 52.3 prior
  • Employment 54.5 vs 53.5 prior
  • Prices paid 61.1 vs 70.1 prior

A sizable miss of expectations and reduction on last month.


USD/CAD Turns Lower To Snap Four-Day Winning Streak

A stronger than expected Canadian jobs report caused a sharp fall in USD/CAD on Friday. The pair initially dropped below support at 1.3437 to erase most of the gains over the prior two sessions but has recovered back above the level to limit losses on the day.

An employment change of 15,300 was much higher than the medium analyst forecast for an additional 600 workers in February. The unemployment rate improved to 6.6% from a prior and an expected 6.8%. Released at the same time was the US jobs report. Although the data was strong and provided confirmation for a rate hike next week, the dollar response was negative as the greenback broadly turned lower.

The headline increase in the US jobs report of 235,000 exceeded the expected gain of 190,000 in February. There was an upward revision for the prior month to 238,000 from the originally reported 227,000. The unemployment rate ticked lower to 4.7% as expected, down from the prior reading of 4.8%. Average hourly earnings were a softer than expected at 0.2% although there was an upward revision for the prior month to 0.2% from the originally reported 0.1% which equated to an annual increase of 2.8%.

A strong ADP jobs report on Wednesday had provided reassurance that Friday’s release would satisfy the Fed’s requirements for a rate increase next week and as a result, the dollar failed to gain today.
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USD/CAD Weekly Forecast March 13-17

USD/CAD advanced for a fifth consecutive week of gains and made a sustained break above resistance at 1.3437, marking the November monthly close, which was the highest since February 2016. The pair was boosted by a stronger US dollar in the early week and extended higher following a mid-week collapse in oil prices.

The US dollar index (DXY) gained in the first half of the week as speculation of a March rate hike fueled a rally. A stronger than expected ADP jobs report caused the markets to price in a solid NFP report which led to a dollar retreat on Friday despite a good reading. DXY turned lower from resistance at 102.21 for a second consecutive week which has resulted in a double top formation. A breach of the prior week lows to activate the pattern on Friday was not sustained.

WTI crude oil prices (USOIL) posted the largest weekly decline in two years. A weekly build in oil inventories that was four times more than the analyst consensus had triggered a break of a bearish flag pattern. Following the technical break, downside momentum picked up significantly and downside pressure remained into the end of the week. A 200-period daily moving average had provided some support on Thursday, but a decline on Friday resulted in a close slightly below the indicator.

Canadian housing data in the past week pointed to a persistently strong housing market, despite earlier measures implemented by the BoC to cool house price inflation. The Canadian jobs report was stronger than expected with a headline increase of 15,300 versus an expected gain of 600. The unemployment rate dropped to 6.6% from an expected and prior 6.8%.
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Canada February Teranet house price index 13.4% y/y vs +13.0% prior

  • Prior was +13.0% y/y
  • Prices up 1.0% m/m
  • Prior m/m reading was +0.5%
  • Index at 202.25 vs 200.34 prior


February 2017 Canadian existing home sales 5.2% vs -1.3% prior m/m

February 2017 Canadian existing home sales report 15 March 2017

  • HPI 16.0% y/y
  • National average sale price 3.5% y/y
  • Newly listed homes 4.8% vs 6.7% prior


Canadian January manufacturing sales +0.6% vs -0.3% expected

Canadian manufacturing sales data for January

  • Prior was +2.3% (revised to +2.1%)

The USD/CAD pair fell slightly during the week, as the 1.35 level continues to offer resistance. There is a significant bottom to the current consolidation at the 1.30 level, so we could reach towards that level. However, I believe that the buyers will return there, especially considering what’s going on in the oil markets. Given enough time, I believe that oil goes lower, therefore driving this pair higher. I have no interest in hanging onto a short trade, but could be convinced to take a short term sell position. Longer-term, I think we’re reaching toward 1.50.




USD/CAD Weekly Forecast March 20-24

USD/CAD dropped lower in the past week to snap a five-week winning streak. The pair broke below a rising channel that had encompassed price action dating back to late February, triggered by the Fed monetary policy meeting.

The Federal Reserve raised rates as expected at their meeting this past week, the reaction was a sharp drop in the greenback. A combination of a priced in rate increase and markets looking for a more aggressive stance to policy tightening led to the decline as the Fed disappointed.

While there were some minor adjustments in the statement and press conference, the Fed did not display the sense of urgency in tightening that would have warranted a stronger dollar.

USD/CAD also didn’t receive support from oil prices as a sharp decline from the prior week ended rather abruptly and a consolidation took place for the bulk of the week.

The resulting doji print on a weekly chart in WTI crude oil prices (USOIL) indicates exhaustion in the downtrend. In addition, a confluence of support as well as an inverted head and shoulders pattern on an hourly chart suggests the potential for a recovery in the upcoming week.

The confluence in USOIL comes from a rising channel that dates back to August lows and a 61.8% Fibonacci retracement from November lows. The area also marks a measured move target from a bearish flag pattern that took place from January 10th to March 7th.
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