USD/CAD Forecast August 26-30 – Canadian Consumer Data Impresses, But Loonie Snoozes

USD/CAD showed little movement last week, but the pair tested the 1.33 line. There are three events in the upcoming week, including the monthly GDP release. Here is an outlook for the highlights and an updated technical analysis for USD/CAD.

It was a busy week for Canadian releases. Manufacturing Sales fell by 1.2% in May, the second decline in two months. On the inflation front, CPI rebounded with a gain of 0.5% in July, easily beating the estimate of 0.1%.Core CPI, which excludes the most volatile items which comprise CPI, posted a gain of 0.3%. The week wrapped up with retail sales data. Core retail sales rebounded with a sharp gain of 0.9%, crushing the estimate of -0.1%. Retail sales came in at zero, above the estimate of -0.3%.

Is the U.S. heading into a recession? There are disturbing signs that this could indeed be the case. Some analysts are predicting that third-quarter growth could drop to just 1.5%, and the August Manufacturing PMI set off some alarm bells, falling into contraction territory for the first time since September 2009. Although the reading of 49.9 was just a shade lower than the previous reading of 50.0, a reading in contraction territory makes the headlines and causes jitters among investors. As well, this marks the seventh successive month that the index has lost ground. There wasn’t much relief in the services sector, as the services PMI slowed to 50.9, down from 52.2 a month earlier.

The Fed minutes provided details of the July meeting, in which the Fed cut rates by 25 basis points, the first rate cut in 10 years. FOMC members said that the cut was intended to stimulate inflation and business investment. The Fed was deeply divided over the July cut, with two members in favor of no change, while another two sought a 1/2 percentage cut. With economic conditions looking cloudy, investors are braced for up to three more rate cuts this year, possibly as early as September.

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

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Kenny Fisher is senior writer at ForexCrunch. A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. ...

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