USD/CAD Forecast July 29-August 2 – Canadian Dollar Falls Flat

USD/CAD posted gains every day last week, as the pair jumped close to 1.0% last week.This week’s key event is Canadian GDP. Here is an outlook for the highlights and an updated technical analysis for USD/CAD.

With only one Canadian event last week, the focus was on U.S. indicators. Durable goods orders rebounded in June, with a strong gain of 2.0%. This marked the strongest gain since August.

In the U.S., economic numbers remain strong. Retail sales ticked lower to 0.4% in June, down from 0.5%. Still, this was above the forecast of 0.1%. The numbers were identical for the core reading. There was positive news from manufacturing. The Empire State Manufacturing Index climbed to 4.3 in July, up from -8.6 a month earlier. The Philly Fed Manufacturing Index jumped to 21.8, its highest level in 9 months. The week ended up with UoM Consumer Sentiment, which climbed to 98.4 in July, up from 97.9 a month earlier. The core reading sparkled, with a gain of 1.2%, its strongest gain since February. The week wrapped up with Advance GDP for Q2, which XX

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:

1. GDP: Wednesday, 12:30. GDP is one of the most important indicators and should be treated as a market-mover. The Canadian reports are released each month. In April, GDP slowed to 0.3%, but managed to beat the estimate of 0.2%. We will now receive the May report.
2. RMPI: Wednesday, 12:30. The Raw Materials Price Index declined by 2.3% in May, its first decline in six months. Will we see a rebound in the June release?
3. Manufacturing PMI: Thursday, 13:30. Markit’s purchasing managers’ index for the manufacturing sector has been perched just below the 50-level for three straight months. This points to ongoing stagnation in the manufacturing sector.
4. Trade Balance: Friday, 12:30. Canada posted a rare trade surplus in May, coming in at C$0.8 billion. This was better than the forecast of C$-1.7B. The trade balance for June is next.

* All times are GMT

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3565.

1.3445 has held in resistance since the first week of June.

This is followed by 1.3385.

1.3350 has held in resistance since mid-June. Next is 1.3265.

1.3175 was breached late in the week for the first time since the last week in June.

1.3125 (mentioned last week) has switched to a support role after USD/CAD posted strong gains last week.

1.3048 has some breathing room in support. 1.2916 is next.

1.2831 has held in support since early October.

1.2729 is the final support level for now.

I am bearish on USD/CAD

The Federal Reserve may be on track to lower interest rates, but the U.S. economy is performing well and sentiment towards the greenback remains strong. With no signs of progress in the U.S-China trade war, risk currencies like the Canadian dollar remain vulnerable.