USD/CAD Forecast Jan. 15-19 2018

Dollar/CAD advanced despite many things going in favor of the C$. Is it a correction to the big move following the jobs report? The Bank of Canada is left, right, and center in the upcoming week. Here are the highlights and an updated technical analysis for USD/CAD.

The BOC's survey was quite bullish on the economy, keeping the momentum after the excellent jobs report. Oil prices reached the highest levels since December 2014 and the US dollar suffered a sell-off of sorts following a report that China will halt or slow buys of US Treasuries. All this should have led to a fall of Dollar/CAD, but the reality was different. A correction after the superb jobs report and three misses on Canadian housing figures weighed: housing starts, building permits, and the NHPI all fell short of forecasts. The ball is now in the court of the BOC.

Updates:

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

  • Canadian rate decision: Wednesday, 15:00. The Bank of Canada is expected to raise interest rates for the third time in this cycle, from 1% to 1.25%. In the previous rate decision, it seemed like BOC Governor and his team were in for a long pause after normalizing rates back to 1% in mid-2017. However, recent economic data has been quite impressive: excellent jobs report. The recent BOC's business survey was quite bullish, pointing to rapid expansion. Alongside a significant rise in oil prices, the time seems ripe for tightening by the Ottawa-based institution. A surprise “no-change” will hurt the C$. A rate hike is basically priced in and the response in case of a hike will depend on the prospects for further moves. Note that the short rate statement will be accompanied by a longer report. Governor Poloz will hold a press conference at 16:15 and may also move markets.
  • ADP Non-Farm Payrolls: Thursday, 13:30. The relatively new ADP report for Canada showed a rise of 59.2K jobs in November. We already have the official jobs report for December, which was excellent as well. It will be interesting to see if the ADP publication corroborates the formal numbers.
  • Manufacturing Sales: Friday, 13:30. The volume of sales at the manufacturing level fell by 0.4% in October, worse than a gain that was expected. This figure has a significant impact on the loonie.
  • Foreign Securities Purchases: Friday, 13:30. Purchases of local financial assets by foreigners have been positive in the past four months. In October, they beat expectations by hitting 20.81 billion. Another positive outcome is likely.
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