USD/CAD Forecast Dec. 19-23

The Canadian dollar slumped and lost 200 points, as USD/CAD closed at 1.3330. This week’s highlights are CPI, retail sales and GDP. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

It was a busy week in the currency markets, courtesy of the Federal Reserve. The Fed raised rates a quarter point to 0.50%, just the second rate hike since the financial crisis in 2008. The Fed was hawkish in its rate statement and upgraded its hike forecast for 2017. This triggered a US dollar rally and the Canadian currency posted sharp losses. Elsewhere, US retail sales missed expectations, while US CPI came in at 0.2%, matching the forecast. Canadian Manufacturing Sales was dismal at -0.8%, well below expectations.

Updates:

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

1. Wholesale Sales: Tuesday, 13:30. The indicator slipped 1.2% in September, well off the forecast of 0.3%. The estimate for the October report stands at 0.3%.
2. Core CPI: Thursday, 13:30. This is the first key event of the week. Inflation levels remain weak, as the index has recorded two straight gains of 0.2%,
3. Core Retail Sales: Thursday, 13:30. The indicator has been struggling, with no gains since May. The September reading was a flat 0.0%, well off the forecast of 0.6%. The markets are expecting a strong turnaround, with an estimate of a 0.7% gain.
4. CPI: Thursday, 13:30. CPI posted improved to 0.2% in October, matching the forecast. The estimate for the November report stands at -0.1%.
5. Retail Sales: Thursday, 13:30. Retail Sales improved to 0.6% in September, after three straight readings of -0.1%. A small gain of 0.1% is forecast for October.
6. GDP: Friday, 13:30. Canada releases GDP released every month. The September report edged up to 0.3% in October, above the estimate of 0.1%. The forecast for November remains steady at 0.1%.

USD/CAD opened the week at 1.3131 and dropped to a low of 1.3074. The pair then reversed directions and climbed sharply to a high of 1.3417, as resistance held firm at 1.3433 (discussed last week). USD/CAD was unable to consolidate at these levels and closed the week at 1.3329.