USDCAD started off the week by trading off from its weekly high of 1.0678 seen on Monday after BOC Governor Mark Carney, in a speech to securities analysts, made statements to the effect that reforms were needed to fix the global financial system.

The rate then started selling off further on Tuesday, as the Loonie gained more ground against the Greenback. This renewed Loonie strength came despite disappointing Canadian Housing Starts which came out at 189K, versus the consensus of 203K.

USDCAD continued falling on Wednesday, as crude oil rose $2 a barrel and China posted trade numbers good for the Canadian Dollar.

The rate then went on to make its weekly low of 1.0285 seen on Thursday after the Canadian Trade Balance came out with a surplus of only 0.2B versus the consensus of 0.7B expected.

USDCAD recovered on Friday with Canadian Capacity Utilization coming out at 74.2% versus a market consensus of 73.4%, and with the previous number revised upward from 70.9% to 71.3%.

The rate went on to close at 1.0336, down an impressive 2.6% for the week.

Fundamental Outlook for USDCAD

The primary market-moving economic data releases and policymaker speeches scheduled for this week in Canada and the United States are as follows:

Canada:

Canadian economic releases for the upcoming week increase in intensity, and feature the Leading Index due out on Friday.

Monday begins the week with the release of Labor Productivity (1.4% Q/Q), New Motor Vehicle Sales (-4.7% M/M) and Manufacturing Sales (0.3% M/M).

Tuesday has nothing of note, while Wednesday just has the BOC's Governor Carney due to speak in Charlottetown.

Thursday has Canadian Wholesale Sales (0.4% M/M) scheduled for release.

Friday has BOC Governor Carney speaking again, this time in St. John's. Also scheduled for Friday, is the highlighted Leading Index (0.8% M/M), as well as Foreign Securities Purchases (4.87B) to end the week.

United States:

The economic data release calendar for the United States this week is quite active and offers some key inflation data that includes Wednesday's PPI data and the CPI numbers due out on Thursday.

Monday begins the week with a speech by FOMC Member Bullard in Tokyo, who will also be speaking in Hong Kong on Tuesday.

Tuesday also offers Import Prices (-1.1% M/M), the Empire State Manufacturing Index (20.1) and TIC Long-Term Purchases (77.3B). The NAHB Housing Market Index (22) is also scheduled tentatively for Tuesday.

These numbers will be followed on Wednesday by the featured release of the Producer Price Index or PPI (-0.5% and 0.1% Core M/M), as well as Building Permits (0.63M), Housing Starts (0.65M), Industrial Production (0.9%M/M) and the Capacity Utilization Rate (74.6%). In addition, Fed Chairman Bernanke is scheduled to make a speech in New York.

Thursday is also a weekly highlight, featuring the important Consumer Price Index or CPI data (-0.2% and 0.1% Core M/M), as well as the Current Account (-120B), Initial Jobless Claims (454K), the Philly Fed Manufacturing Index (21.3) and the CB's Leading Index (0.4% M/M).

That finishes off the week because Friday has nothing notable due out.

Technical Outlook for USDCAD

On the technical front, USDCAD again saw some impressive volatility last week. The rate initially rallied sharply higher to 1.0678 before trading down in steps to the 1.0285 low seen on Thursday. The rate then only managed a minor short-covering rally into the close at 1.0336.

Furthermore, the rate has again broken and closed below its 200-day Moving Average that now comes in 1.0451 and is still sloping downward. This re-establishes the bearish medium term outlook in USDCAD.

Also, with the rate's 14-day RSI now trading in neutral territory at 45, the market could again be ready for fresh action to the downside in the near term. As a result, selling rallies again seems preferable this week for another possible downwards move to test the low at 1.1090 and possibly even at 0.9929.

Resistance in USDCAD comes in at 1.0387, at 1.0451 and at the 1.0687 level. Support is indicated near the current level at 1.0332, in the 1.0245/85 region, plus at the important "parity" or 1.0000 psychological level.

Note: Past performance is not indicative of future results.

Figure 1: Daily candlestick chart of USDCAD showing its 200-day MA in red, Bollinger Bands in green and the 14-day RSI in the indicator box in blue.