The Canadian dollar ended the last trading week as the strongest among most-traded currencies despite surprisingly poor employment data. What expects the loonie during the current week? The week will be less eventful than the previous one, with the Bank of Canada monetary policy meeting being the only major event important for the Canadian currency specifically.
The BoC will hold a meeting on July 10 at 14:00 GMT. The latest GDP and consumer inflation figures beat expectations, making it unlikely for the central bank to cut its interest rates. In fact, some analysts thought that the domestic data was good enough for the bank to start raising rates, at least if the environment abroad was better. Unfortunately, dovishness of major central banks, the threat of trade wars, and the outlook for global economic slowdown make a hike highly unlikely. As a result, the general consensus is that the BoC will leave interest rates unchanged. That means traders will pay close attention to the wording of the accompanying statement, the Monetary Policy Report, and the press conference. While most analysts expect the bank to retain a neutral tone, any deviations from expectations can affect the currency strongly.
As for macroeconomic releases, Canada Mortgage and Housing Corporation will release a housing starts report on Tuesday. Analysts predict the report will show housing starts to be at an annual rate of 209,000 in June, up from 202,000 in May. Statistics Canada will release building permits data on Tuesday too and the New Housing Price Index on Thursday.
With expectations of a neutral tone from the Bank of Canada, DailyFX issued a neutral forecast for the Canadian dollar.
Forex Crunch issued a bullish forecast for USD/CAD, expecting the loonie to drop if Canadian policymakers sound dovish:
The Canadian dollar enjoyed a spectacular June, gaining over 3.0%. Investors will be keeping a close eye on the BoC, which is expected to hold the course on rates. If policymakers sound dovish about economic conditions, investors could respond by sending the Canadian currency dollar. The strong U.S. employment numbers for June could delay a rate cut from the Fed, which is good news for the greenback.
Indeed, US nonfarm payrolls beat expectations, whereas Canadian employment was surprisingly disappointing, giving the greenback edge over the loonie.
Action Forex pointed at 1.3145 as an important resistance level for USD/CAD and 1.3239 above it. As for support, 1.3052 is the closest and the 1.2673 Fibonacci level below it. As for the longer term, the forecast is following:
In the bigger picture, medium term outlook stays neutral for now even though the case of bearish reversal is building up.
And for the even longer term:
In the longer term picture, outlook remains unchanged that price actions from 1.4689 (2016 high) are forming a corrective pattern. Rejection by 1.3793 resistance would raise the chance of lengthier extension, with risk of dropping through 1.2061 low before completion.
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