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CAD Rate Forecast: Loonie Awaits NAFTA Outcome for Direction

CAD Rate Forecast: Loonie Awaits NAFTA Outcome for Direction

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Fundamental Forecast for CAD: Neutral

USDCAD Analysis and Talking Points:

  • Canadian Dollar Awaits NAFTA Outcome
  • Widening US-Canadian 2yr Spreads Pushes USDCAD to Better Levels

See our Q3 CAD forecast to learn what will drive the CAD through the quarter.

Widening US-Canadian Bond Spreads Lifts USDCAD

The past week saw the Canadian Dollar weaken towards 1.32 against the greenback with much of the same factors contributing to the weakness. US-Canadian 2yr rate differentials continue to widen with the spread back above 60bps and thus moving in favour of USD buying vs CAD. Elsewhere, US data has outperformed relative to Canada amid strong NFP and ISM reads, while ongoing NAFTA discussions continue to cloud the outlook for the Loonie. The Bank of Canada provided a relatively balanced statement, leaving the door open for a hike in October.

US and Canadian 2yr Bond Spreads

CAD Awaits NAFTA Outcome for Direction

As we look towards next week, the Canadian Dollar may see somewhat of a quieter week from the data front with a lack of tier 1 data to drive price action in the CAD. However, USDCAD may experience some volatility from the USD side with CPI due. Direction in CAD will likely depend on the tone regarding the ongoing NAFTA discussions with focus on whether an agreement can be reached.

Next week’s Economic Calendar

Source: DailyFX


Chart by IG

USDCAD Technical Levels

Resistance 1: 1.3180-1.32 (Resistance Area)

Resistance 2: 1.3290 (July high)

Support 1: 1.3115 (23.6% Fibonacci Retracement)

Support 2: 1.3080-90 (Trendline support)


--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at

Follow Justin on Twitter @JMcQueenFX

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.