USD/CAD Forecast June 22-26 – Canadian Dollar Holds Own Despite Dismal Retail Sales
USD/CAD was almost unchanged last week. There are no releases in the upcoming week. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.
Manufacturing sales plunged 28.5% in April, a new record. This follows a 9.8% drop beforehand, as manufacturing facilities were at limited capacity or shut down due to COVID-19. Consumer inflation bounced back with a 0.3% gain in May, after two straight declines. Still, this missed the forecast of 0.8%.
Core CPI, which excludes the most volatile items, declined by 0.1%. There was positive news on the employment front, as the ADP jobs report indicated that economy added 208.4 thousand jobs in May. The week ended on a sour note, as retail sales plummeted 26.4% in April. The forecast stood at 15.0%. The core read declined by 22.0%, compared to the estimate of -12.7%.
In the U.S., May retail sales crushed the forecasts, raising hopes that the U.S. economy is on the mend. The headline figure bounced back with a sparkling gain of 17.7%, after a decline of 16.4% a month earlier. The estimate stood at 7.9%. The core reading jumped 12.4%, well above the gain of 5.5%. In April, core retail sales declined by 17.2%.
Federal Reserve Chair Powell had a grim message for Congress, warning that the U.S. economy was in the midst of a deep downturn, with “significant uncertainty” about how long an economic recovery would take. Powell added that he did not expect a full recovery until the public was convinced that COVID-19 has been contained. Jobless claims showed little movement last week, with a gain of 1.5 million. This was higher than the forecast of 1.3 million.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
USD/CAD Technical Analysis
Technical lines from top to bottom:
- The round number of 1.39 has been a resistance line since late May. 1.3757 is next.
- 1.3661 (mentioned last week) has some room in resistance.
- 1.3550 is providing support.
- 1.3420 is next.
- 1.3330 was tested last week, for the first time since March.
- 1.3265 is the final support level for now.
I am neutral on USD/CAD
The Canadian economy has been hit hard by COVID-19 and is very dependent on the U.S. economy, which is also struggling. As a minor currency, the Canadian dollar remains vulnerable due to the severe economic conditions. Still, the currency is up 3.1% against the U.S. dollar in the second quarter.
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