USDCAD Forecast: Canadian dollar gains continue, wholesales sales next

The Canadian dollar has posted small gains in the Tuesday session, continuing the trend seen on Monday. Currently, USD/CAD is trading at 1.3023, down 0.16% on the day. In economic news, Canada releases Wholesale Sales. There are no U.S events on the schedule. On Wednesday, Canada releases retail sales reports, while the U.S will publish Existing Home Sales. As well, the U.S releases Existing Homes and the Federal Reserve will publish the minutes of the July policy meeting.

Will USD/CAD drop below the symbolic 1.30 level? The Canadian dollar has been moving higher since Friday and could drop below 1.30 this week, for the first time since August 7. It’s been a rough August for the Canadian dollar, as the escalating trade war has dampened risk appetite and hurt the Canadian dollar, which is a minor currency. However, the announcement that the U.S and China will hold trade talks in Washington later this week have raised investor confidence and boosted the Canadian currency. If the talks show signs of progress, such as the suspension of a $16 billion tariff scheduled to take effect on August 23, then the Canadian dollar rally could continue.

The Canadian dollar ended the week with strong gains, climbing 0.7 percent. The boost to the currency came from a strong CPI report, which showed a gain of 0.5%. This easily beat the estimate of 0.1% and marked a 5-month high. On an annualized basis, CPI jumped 3.0%, its highest level since 2011. The strong inflation report has raised expectations that the Bank of Canada will raise rates at the September meeting. The likelihood of a quarter-rate hike next month is only 33%, but this rises to 75% for an October hike, if the BoC stays on the sideline next month.

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USD/CAD Fundamentals

• 8:30 Canadian Wholesale Sales. Estimate 0.7%
• 8:30 Canadian Core Retail Sales
• 8:30 Canadian Retail Sales
• 10:00 US Existing Home Sales. Estimate 5.44M
• 14:00 US FOMC Meeting Minutes

Open: 1.3043 High: 1.3047 Low: 1.3015 Close: 1.3023

USD/CAD Technical

S3	S2	S1	R1	R2	R3
1.2733	12831	1.2970	1.3067	1.3160	1.3292

USD/CAD ticked lower in the Asian session. The pair is showing little movement in European trade

• 1.2970 is a support level
• 1.3067 is the next resistance line
• Current range: 1.2970 to 1.3067

Further levels in both directions:

• Below: 1.2970, 1.2831 and 1.2733
• Above: 1.3067, 1.3160, 1.3292 and 1.3436

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