USD/CAD Forecast For Oct. 21-25

The Canadian dollar recorded gains for a second straight week, as USD/CAD dropped to its lowest level since late July. This week’s key events are the Federal election and retail sales reports. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.

In Canada, CPI climbed 1.9% on an annual basis in September, beating the estimate of 1.7%. On the manufacturing front, manufacturing sales posted a solid gain of 0.8% in August, after two straight declines. The ADP nonfarm payrolls report posted a gain of 28.2 thousand in September, compared to 49.3 thousand a month earlier.

In the U.S., retail sales contracted in September. The headline reading declined 0.3%, after a gain of 0.4% in the previous release. Core retail sales declined 0.1%, missing the estimate of 0.2%. There was more dismal news, as Philly Fed Manufacturing Index dropped to 5.6 in October, compared to 12.0 points a month earlier.

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

  1. Federal Election: Monday, All Day. The election is expected to go down to the wire, with the Conservatives and Liberals running neck-and-neck. If the result is a minority government, this would mean some political uncertainty, which could weigh on the Canadian dollar.
  2. Retail Sales Reports: Thursday, 12:30. Retail sales is the primary gauge of consumer spending, and can have a significant effect on the movement of USD/CAD. In July, the core release came in at -0.1%, its second decline in three months. The headline reading improved to 0.4%, marking a 3- month high. We now await the August data.
  3. BOC Business Outlook Survey: Tuesday, 14:30.  This well-respected survey looks at a wide range of business conditions, including spending and hiring expectations. It should be treated as a market-mover.
  4. Wholesale Sales: Wednesday, 12:30. Wholesale Sales have been quite erratic, resulting in estimates that are often well off the mark. In July, the indicator sparkled with a gain of 1.7%, crushing the estimate of 0.0%. Will we see another strong gain in August?
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