In the article below we look at the outlook for USD/CAD – The USD has firmed up and we think it's going higher against the majority view which is for a lower USD. Our logic and view of the key technical levels in the article below...
Analysts are bullish forecasts on the Canadian dollar as forecasters believe that central banks around the world including the Federal Reserve are close to the end of their hiking cycles and will soon start to cut. A Reuters survey of nearly 40 analysts concluded that the CAD would strengthen about 2.0% to 1.31 per U.S. dollar, or 76.34 U.S. cents, in six months compared to a forecast for 1.32 in last month's forecast. Other factors making the market bullish are a hawkish Bank of Canada and the view the global economy will strengthen later in the year.
On Friday, the Canadian economy lost 6,400 jobs in July, against the consensus of a 21,100 increase will this be enough to prevent another Bank Of Canada rate hike?
“The re-acceleration in wages and still low unemployment rate mean that today's data are unlikely to convince the Bank of Canada that the labor market has loosened enough yet to sustainably achieve its 2% CPI target, despite the weaker headline jobs count.” Because of that we are, for now, retaining our forecast for one more interest rate hike, although some good news on the inflation front in two weeks could be enough to prevent that.” (CIBC)
We would expect a lower inflation print and also think the Bank of Canada will be mindful of the slow up in the global economy which is bearish for commodity prices and all commodity prices. We have written several articles on the slow up in the global economy which we think will gather pace and end in recession – Here we will look at a commodity closely correlated with the CAD which is crude oil.
We have seen a strong bull move but think this is short covering driven by news that Saudi Arabia will extend a 1 million barrel per day voluntary crude output cut into September, there doing this to hold prices up against slowing demand so it could be a buy the rumor sell the fact as we come into big resistance. Keep in mind, the USD was firm on the CAD despite the surge in crude and will probably go up anyway if crude rises but if crude falls, this will weigh on the CAD...
Our view of the key levels of support and resistance to look out for are on the chart below.