The Canadian dollar improved last week, as USD/CAD lost close to one cent. The pair closed the week at 1.0655. Highlights for the upcoming week include Manufacturing Production, Core CPI and Core Retail Sales. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
Solid retail sales out of the USÂ boosted the greenback, but the loonie was able to recover on Friday following weak US inflation numbers.
Updates:
- Dec 20, 18:51: Forex Forecast for 2014 (Video): The prolonged global recession remains a key influence on currency markets as we wait to see what role monetary policies…
- Dec 20, 14:34: Canadian inflation remains worryingly low – USD/CAD breaks to: Canadian retail sales dropped by 0.1%. They were expected to rise by 0.3% in October after a rise of 1%…
- Dec 19, 15:17: Markets unwinding after taper day and the Fed’s promise: The long awaited “taper†has finally arrived, with equity markets taking the announcement in stride and treating the relatively more…
- Dec 19, 14:39: USD/CAD December 19 2013 Resumes Broader Upside: USD/CAD: With USD/CAD rallying to resume its broader upside, further strength is likely in the days ahead. Further out, resistance…
- Dec 18, 21:38: Analysis: Sweet Dectaper is still a taper – USD has: The Fed announced QE tapering worth $10 billion. However, it sweetened the move especially with strengthening forward guidance. There are…
- Dec 18, 20:19: Bernanke’s presser: QE could end in late 2014, sees case: The Fed finally made the move and announced a $10 taper. However, not only was the size small, but it…
- Dec 18, 20:01: Fed announces $10 billion QE tapering with softer forward: The Federal Reserve announces a taper of $10 billion, with $5 billion on each type of assets: MBS and Treasuries….
- Dec 18, 17:16: On tapering, JPY and AUD are vulnerable; on No-tapering,: Markets are highly anticipating the FOMC statement. To taper or not to taper? The dollar is set to rise on…
- Dec 18, 16:45: FOMC Preview: Dectaper coming? 5 Scenarios: Ben Bernanke and his colleagues in the FOMC are meeting to decide on monetary policy and QE tapering is on…
- Dec 18, 16:00: 11 reasons for QE tapering in December: The Fed convenes for the last time in 2013 and the option to taper bond buys is certainly on the…
- Dec 18, 15:10: The BOJ may have to step up stimulus in 2014: The overnight Asian session started off on positive ground, with investor optimism spurred by hopes that the Bank of Japan…
- Dec 18, 11:18: T Day: Idea of the Day We have arrived at decision day for the Fed. We continue to see around a 40%…
- Dec 17, 15:37: Business as usual before the big Fed event: Equity price action yesterday displayed investors were hardly bothered by a potential taper from the FOMC this coming Wednesday, as the…
- Dec 16, 18:03: Will Bernanke cause a tantrum before the New Year?: Vladimir Nabokov once said that “complacency is a state of mind that only exists in retrospective – it has to…
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:Â 
- Foreign Securities Purchases: Monday, 13:30. Foreign Securities Purchases is closely linked to currency demand, as foreigners must purchase Canadian dollars in order to buy Canadian securities. The indicator jumped in October to 8.36 billion dollars, its highest level since May. The markets are expecting the upward trend to continue, with the estimate standing at 9.24 billion.
- Manufacturing Sales: Tuesday, 13:30. This is the first key event of the week. The indicator posted a small decline in September but bounced back up in October with a gain of 0.6%. This edged above the estimate of 0.5%. The markets are braced for a downturn for November, with an estimate of -0.2%. Will the indicator beat this prediction?
- Wholesale Sales: Wednesday, 13:30. Wholesale Sales is an important indicator of consumer spending. The indicator came in at 0.2% last month, short of the estimate of 0.4%. The upcoming forecast remains at 0.4%.
- Core CPI: Friday, 13:30. This key index is considered more reliable than CPI, as it excludes the 8 most volatile items. The index has been very steady, with three straight gains of 0.2%. The November estimate stands at 0.1%.
- CPI: Friday, 13:30. CPI has looked sluggish, and posted a decline of 0.2% last month. This missed the estimate of 0.2%. The forecast remains unchanged at 0.2%.
- Core Retail Sales: Friday, 13:30. This indicator is considered the most important gauges of consumer spending. Core Retail Sales excludes automobile sales, which tend to be volatile and distort the release. The indicator has been weakening in recent readings, and posted an unimpressive figure of 0.0% in October, shy of the estimate of 0.2%. The estimate remains at 0.0% for the upcoming release.
- Retail Sales: Friday, 13:30. Retail Sales posted a strong gain of 1.0%, a four-month high. This easily beat the estimate of 0.3%. The markets are anticipating another gain of 0.3% for the upcoming release.
* All times are GMT.
USD/CAD Technical Analysis
USD/CAD opened the week at 1.0655 and touched a high of 1.0670. The pair then reversed directions, falling to a low of 1.0561, as support at 1.0523 (discussed last week) remained intact. The pair closed the week at 1.0571.
Live chart of USD/CAD:
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Technical lines, from top to bottom:
We start with resistance at 1.1124. This line has remained intact since July 2009, when the Canadian dollar showed sharp volatility, trading as high as the 1.17 level.
1.0945, which is protecting the key 1.10 level. This line has not been tested since September 2009.
Next is resistance at 1.0853. This line has held firm since May 2010.
1.0723 was a cap in mid-2010, before the US dollar tumbled and dropped all the way into 0.93 territory. With the Canadian dollar losing ground of late, this line was under pressure last week but held firm.
1.0660 has been busy and was breached for the second straight week, but remains intact as a strong resistance line.
1.0523 was a peak back in November 2011. This line held firm as USD/CAD lost ground late in the week.
1.0446 continues to provide support. This line has some breathing room as the USD/CAD trades at higher levels.
1.0340 had a busy October and is providing strong support. 1.0250 is next. This line has held firm since mid-September.
1.0180 provided support for the pair during March, and saw a lot of activity in the first half of June. It remains a strong support line.
The round number of 1.01 was a trough back in July 2012 and switched to resistance afterwards. The line proved its strength several times in 2013, most recently in mid-May.
Our final support level for now is the round number of parity. This is a clear line which has not been tested since mid-February.
I am bullish on USD/CAD
The Canadian dollar showed some improvement last week, but speculation that the Fed could taper QE this week  is likely to result in investors staying clear of the loonie in favor of the safe-haven US dollar.
Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- USD/CAD (loonie), check out the USD/CAD.
