It was another quiet week for the Canadian dollar, as USD/CAD posted slight losses. There are five releases in the upcoming week, including GDP and trade balance. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.

Oil prices continue to display volatility and declined almost 4.0% last week. Saudi Arabia has restored its oil production more quickly than expected, and a weekly U.S. crude inventory report showed back-to-back surpluses. The drop in crude prices didn’t affect the Canadian dollar, but if the decline continues, the loss in oil revenue could weigh on the Canadian dollar.

Over in the U.S., third-estimate GDP for Q2 came in at 2.0%, confirming the second estimate. This is significantly lower than the robust gain of 3.1% in the first quarter, and the slowdown in the U.S. could have negative repercussions for the Canadian economy. On the political front, the Democrats have initiated impeachment proceedings against President Trump, over possible abuse of power. Trump had placed a telephone call to the Ukrainian President and discussed the business dealings of Joe Biden and his son. However, the impeachment process is a lengthy one which is unlikely to impact on the currency markets, at least for now.

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

1. RMPI: Monday, 12:30. The Raw Materials Price Index bounced back in July with a gain of 1.2%, but this fell short of the estimate of 1.6%. The estimate for August stands at 1.3%
2. GDP: Tuesday, 12:30. Canada releases GDP on a monthly basis. The economy has posted growth rates of 0.2% in the past two months, pointing to weak economic activity.The markets are braced for a weaker release in July, with an estimate of 0.1%.
3. Manufacturing PMI: Tuesday, 13:30. The manufacturing sector is struggling, with the PMI in contraction territory in four of the past five releases. In August, the PMI slipped to 49.1 points.
4. Trade Balance: Friday, 12:30. After posting two back-to-back trade surpluses, Canada recorded a trade deficit of C$1.1 billion in July. This missed the estimate of a trade surplus of $0.2 billion. A deficit of $1.1 billion is projected for August.
5. Ivey PMI: Friday, 14:30. The PMI rose sharply in August to 60.6, up from 54.2 a month earlier. This marks the first time that the PMI has broken above the 60-level since October. The upward trend is expected to continue in September, with a forecast of 62.6.

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3630. 1.3565 is next.

1.3445 has held in resistance since the first week of June. This is followed by 1.3385.

1.3350 is the next resistance line.

1.3265 was active throughout the week. USD/CAD ended the week just below this line.

1.3175 is providing support.

1.3125 (mentioned last week) is next. It has provided support since the end of July.

1.3048 is protecting the round number of 1.3000, which has psychological significance.

1.2916 has held firm since October.

1.2830 is the final support line for now.

I am neutral on USD/CAD

The Canadian dollar continues to drift, showing little appetite to move in either direction. Recent economic numbers have been decent, which has offset the drop in oil prices. However, if oil prices continue to slip, this could weigh on the Canadian currency.