The US dollar has posted strong gains against its northern counterpart following last week’s Fed announcement. Last Wednesday US Fed Chief Ben Bernake announced that quantitative easing could be tapered as early as this year, will full-scale rollback as early as next year. The USD/CAD trade has been heavily influenced by US monetary policy, more so than anything the Canadian dollar has (or hasn’t) done. However, Canada’s weak showing on Friday didn’t help the loonie’s cause, as CPI and retail sales all failed to meet expectations. At the other end of the spectrum is the US dollar, which has been supported by a deepening US recovery. On Tuesday, US fundamentals continued to improve, with a better than expected showing across the board.
US Housing Price Index
- Actual: 1.3 percent (consensus: 0.8 percent)
Consumer Confidence Index
- Actual: 76.2 (consensus: 71.0)
Durable Goods Orders
- Actual: 3.6 percent (consensus: 3.0 percent)
Durable Goods Orders ex Transportation
- Actual: 0.7 percent (consensus: 0.0 percent)
Below we size up the market vitals for USD/CAD and discuss what this pair can expect to see over the near-term.
USD/CAD Performance Tracker
- Current Price: 1.0502 (-0.01 percent)
- 5-Day: +2.53 percent
- Outlook: Bullish
- Support levels: 1.0497, 1.0495, 1.0493
- Resistance levels: 1.0502, 1.0504, 1.0506
The outlook on USD/CAD is strongly bullish. If the pair breaks the 1.0600 resistance, we could be eyeing 1.08 and 1.10 before year’s end. The only question on investors’ minds is whether USD/CAD is overbought. This week’s economic reports will shed some light and provide investors with a clearer picture of the US dollar’s overbought situation.
On the Canadian front, GDP data is also expected this week. While investors can expect a modest gain, it won’t be enough to spur favour in the loonie’s direction over the short-term. Market sentiment toward the Canadian economy has declined in recent months. Combined with US optimism, we expect a strongly bullish USD/CAD to persist indefinitely.
What are your technical positions on USD/CAD? Post below to share your thoughts.Note: Past performance is not an indication of future results. This post is not investment advice. CFD trading bears risk to your capital.