USD/CAD Forecast May 17-21 – Canadian CPI, Retail Sales Next

The Canadian dollar posted small gains last week, as USD/CAD ended the week just above the 1.21 level. There are six economic releases in the upcoming week. Here is an outlook for the highlights and an updated technical analysis for USD/CAD.

It was a light calendar for Canadian releases. Manufacturing Sales rebounded in March with a strong gain of 3.5%, up from -1.6% and matching the forecast.

In the US, April inflation was much stronger than expected. Headline CPI (YoY) climbed 4.2%, up from 2.6% beforehand. PPI also climbed sharply with a gain of 6.2%, up from 4.2% beforehand. Despite the surge in inflation, Fed members reiterated that there are no plans to taper the massive stimulus program.

Retail Sales for March (MoM) disappointed. The headline reading slowed to 0.0%, down from 9.8% in the previous release and shy of the estimate of 1.0%. Core Retail Sales contracted by 0.8%, down sharply from 8.4% and shy of the forecast of 0.5%.

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

  1. Housing Starts: Monday, 12:15. Housing Starts jumped to 335 thousand in March, up from 246 thousand. The April release is expected to slow to 250 thousand.
  2. Foreign Securities Purchases: Wednesday, 12:30. Foreign investments in Canadian securities jumped to C$8.52 billion in March, a three-month high. We now await the April data.
  3. CPI Report: Wednesday, 12:30. Headline CPI (YoY) is expected to rise to 4.3% in April, up from 3.2%. BoC Core CPI, the central bank’s preferred gauge, is projected to rise to 1.3%, slightly lower than the March read of 1.4%.
  4. ADP Employment Report: Thursday, 12:30. The March ADP report indicated that the economy created 634 thousand new jobs, an outstanding number. Will we see another sharp gain in April?
  5. BoC Financial System Review: Thursday, 15:00. The Bank of Canada publishes its overview of the financial system twice a year. Apart from data about the banks’ situation, the publication also includes economic data.
  6. Retail Sales: Friday, 12:30. Retail Sales (MoM) sparkled in February, as the headline and core readings each produced gains of 4.8%. The March consensus stands at 3.7% for the headline read and 4.0% for core retail sales. Consumer spending is closely watched by investors and significant deviation from expectations could certainly move the Canadian currency.
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