COZfx: USD/CAD weekly outlook

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COZforex: The US dollar ended the day higher against the Canadian dollar on Friday as expectations that the Federal Reserve will soon start to pull back on asset purchases lent broad support to the greenback.

USD/CAD hit session highs of 1.0552, the pair’s highest since June 24, before trimming gains to close at 1.0515, 0.41% for the day and 0.34% higher for the week. COZforex senior currency strategist Ian • Quigley said, USD/CAD is predicted to find support at 1.0432, and a drop through could take it to the next support line of 1.0384. Meanwhile, the pair is predicted to find its first resistance at 1.0517, and a rose through could take it to the next resistance line of 1.0554.

Data on Friday showed that the University of Michigan’s consumer sentiment index rise to 84.1 from a preliminary reading of 82.7 in June, nearing the almost 6 years high reached in May. The dollar was also boosted after Fed Governor Jeremy Stein indicated that the bank may begin tapering its USD85 billion-a-month asset purchase program in September.

Stein said the decision to taper bond buying must be based on economic progress since the Fed implemented its easing program and should not be "excessively sensitive" to economic data releases in the weeks preceding the decision. Investors had scaled back expectations that the Fed will start tapering bond purchases this year following a downward revision to US first quarter growth on Wednesday.

In Canada, official data on Friday showed that the economy grew slightly more than expected in April. Statistics Canada said gross domestic product expanded by 0.1%, following growth of 0.2% in March. Economist had expected a flat reading in May. The report said Canadian services sector output expanded 0.3% on the month but output in the goods sector fell 0.3%, as oil and gas extraction declined 2.7%.

Looking ahead, Friday’s US nonfarm payrolls data will be closely watched for indications of how the recovery in the US labor market is progressing. Meanwhile, Canada is to release trade and employment data.

(COZ forex UK)