USD/CAD Forecast Sep. 3-7- NAFTA is finally here, sort of

Dollar/CAD dropped sharply on the deal between the US and Canada and also the weakness of the US Dollar. Will the trend continue? Canada’s jobs report stands out. Here are the highlights and an updated technical analysis for USD/CAD.

The US and Mexico struck a deal and Canada is set to join. The C$ advanced on the news, even though Canada may eventually be excluded from the deal. The greenback suffered general losses as markets remained optimistic in general. Canada is set to make concessions in order to secure a deal.

Updates:

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

  • Manufacturing PMI: Markit’s manufacturing purchasing managers’ index for Canada came out at 56.9 points in July, reflecting good, yet not outstanding growth levels in the sector. A better number could be seen now, on optimism for a NAFTA deal.
  • Trade Balance: Wednesday, 12:30. Canada had a smaller trade deficit than expected in June, only 0.6 billion. We may see a wider deficit this time. Trade data is politically sensitive amid trade talks.
  • Labor Productivity: Wednesday, 12:30. Productivity growth is problematic in many developed economies. Canada’s figures dropped by 0.3% in Q1 after a fall beforehand. The see-saw may continue.
  • Rate decision: Wednesday, 14:00. The Bank of Canada raised the interest rate in its July meeting, as they had telegraphed well in advance. The surprise back then was that they maintained their hawkish bias, despite repeatedly warning about the uncertainty resulting in US tariffs. This time, Governor Poloz and his colleagues are unlikely to move on the rates, leaving it to a meeting that also consists of a press conference. Nevertheless, they will express themselves in the statement which will likely discuss trade and also recent GDP numbers.
  • Building Permits: Thursday, 12:30. The housing sector has seen some rocky times, with soaring prices hit by regulation. A drop of 2.3% was recorded in June. July could see a bounce back.
  • Jobs report Friday, 12:30. Canada reported a whopping gain of 54.1K jobs in July, but this concealed a loss of full-time jobs and a leap in part-time jobs. In addition, wages disappointed by reverting back down after two good months. The unemployment rate stood at 5.8%. In August, we can expect a more modest increase in positions.
  • Ivey PMI: Friday, 14:00. The Richard Ivey Business School showed impressive optimism about the economy. The score of 61.8 in July reflects robust growth. We may see a slide in the report for August.
  • *All times are GMT

    USD/CAD Technical Analysis

    Dollar/CAD dropped sharply, falling below the 1.2960 level (mentioned last week).

    Technical lines from top to bottom:

    1.3295 held the pair down in mid-July. 1.3220 capped it earlier in the month.

    1.3170 served as resistance in mid-August. 1.3070 was a swing low in mid-July and remains pivotal in late August.

    Below 1.3000 we find the mid-August trough of 1.2960. 1.2890 is the initial low seen in late August.

    1.2820 was a stepping sone on the way up in late May. 1.2730 provided support earlier in May. Lower, 1.2630 held the pair down back in April.

    I remain bearish on USD/CAD

    Canada wants a deal and will get it, removing a significant burden off the economy and opening the door to further rate hikes by the BOC.

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    Further reading:

    • EUR/USD forecast – for everything related to the euro.
    • GBP/USD forecast – Pound/dollar predictions
    • USD/JPY forecast – analysis for dollar/yen
    • AUD/USD forecast – projections for the Aussie dollar.
    • Forex weekly forecast – Outlook for the major events of the week.

    Safe trading!


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