Forex: USD/CAD: Forecast for declining Canadian dollar

on Jan 17, 2014
Updated: Oct 21, 2019
Listen Friday, January 17th:_ The USD/CAD has so far today been rising within the range 1.0925 to 1.0954 after two days of losses. At the moment the pair is priced at 1.0951 and is on the verge of logging a second consecutive weekly gain. The price has been supported by the 89-hour simple moving average since 6 January, which is currently positioned at 1.0930.

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The rise is also supported by the price action being above the 89- and 200-period simple moving averages on the 1H, 4H, daily and weekly charts. On the same scales the MACD (9, 12, 1) is positive indicating bullish sentiment.
To the upside today, the pair will be targeting Wednesday’s peak of 1.0990 – the highest point since 28 September 2009.
The Conference Board of Canada predicts further weakening of the Canadian dollar as the nation’s economy underperforms.

The loonie (CAD) lost 7.7 percent against the US dollar in 2013, and continues to fall and is already 3.25 percent down so far this year.
The Conference Board says that the falling Canadian currency signals a lack of confidence in Canadian growth prospects.
Conference Board senior vice-president and chief economist Glen Hodgson said yesterday: “Arguably more important than the value of the loonie is the signal it sends about the Canadian economy. Markets are betting that the Canadian economy will continue to underperform.”

He continued: “This assessment is consistent with our own forecast, which calls for U.S. gross domestic product to grow by 3.1 per cent in 2014, much better than Canadian growth of 2.3 per cent.”
Towers Watson director of investment consulting Janet Rabovsky says that “with a lower Canadian dollar, there is hope that manufacturing businesses, and certainly the export sector of the economy, can contribute to reducing the unemployment rate in the next few years”.

Hodgson says that it is not clear if Canadian exporters will be able to fully capitalize on a weaker dollar because of the loss of capacity in the manufacturing sector since 2008.

Furthermore, TD chief economist Craig Alexander says that the US central bank’s “decision to taper asset purchases has greased the skids under an already depreciating loonie”. He also says: “However, the fundamentals are not Canadian-dollar positive either, and the loonie likely has further to fall.”

BMO chief economist Doug Porter forecasts that the Canadian Gross Domestic Product will be supported by a falling dollar in the long-term.
The pair is expected to be more volatile around the US economic releases today. Data on the housing market will be provided by the Census Bureau at 13.30 UTC with the December Building Permits and Housing Starts announcements.
The Fed is due to release the December Capacity Utilization Rate and Industrial Production at 14.15 UTC.
The preliminary UoM Consumer Confidence for this month is scheduled for release at 14.55 UTC.
The US Job Openings and Labor Turnover Summary for November is due out at 15.00 UTC from the Bureau of Labor Statistics.
Resistances today: 1.0960, 1.0980 and 1.1000.
Supports: 1.0935, 1.0920 and 1.0900.


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