USD/CAD was mostly uneventful last week, but the Canadian dollar posted strong gains on Friday. It promises to be a busy week, highlighted by key employment data in both Canada and the U.S. Here is an outlook for the highlights of this week and an updated technical analysis for USD/CAD.
In Canada, GDP posted a gain of 0.3% in January, good enough for a 3-month high. This release comes after two straight contractions, boosting the Canadian dollar on Friday. In the U.S., Final GDP disappointed with a gain of 2.2%, compared to the initial reading of 2.6%. Personal spending posted a weak gain of 0.1%, and CB consumer confidence fell to 124.1, down sharply from 131.4 in the previous release.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
- Manufacturing PMI: Monday, 13:30. The PMI has slowed for three successive months, pointing to continuing weakness in the manufacturing sector. This is largely due to the trade war between the U.S. and China, which has dampened demand for Canadian exports. In February, the reading fell to 52.6, pointing to weak expansion.
- Ivey PMI: Thursday, 14:00. The indicator has fallen sharply in 2019, as the slowdown in the Canadian economy remains deep. The indicator came in at 59.7 in December, pointing to strong expansion. The February release dropped to 50.9, barely above the 50-level, which separates contraction and expansion. The March release is expected at 51.4 points.
- Employment Data: Friday, 12:30. The labor market has been perhaps the brightest spot in the economy. The economy created 55.9 thousand jobs in February, marking a second straight month of strong job growth. However, the markets are braced for a weak reading of -10 thousand in March. The unemployment rate is expected to stay pegged at 5.8%.
*All times are GMT
USD/CAD Technical Analysis
Technical lines from top to bottom:
1.3757 has held in resistance since May 2017.
1.3660 was the high point for USD/CAD in December.
1.3547 capped USD/CAD in June 2017. Next, 1.3445 was the peak in early December.
1.3385 is next.
1.3350 (mentioned last week) held in support until late in the week, when the pair broke through.
Lower, 1.3265 was the high point in mid-November. 1.3225 has held in resistance since early March.
1.3175 was a swing low in late November.
1.3125 was a low point earlier that month.
1.3048 has provided support since early November.
I am bullish on USD/CAD
The Canadian dollar has been unable to generate much momentum, as risk appetite has been kept in check by a dovish Federal Reserve and ongoing global trade war. Canadian employment numbers are projected to be very soft, and this could send the loonie sharply lower.
Further reading:
- EUR/USD forecast – for everything related to the euro.
- GBP/USD forecast – Pound/dollar predictions
- USD/JPY forecast – analysis for dollar/yen
- AUD/USD forecast – projections for the Aussie dollar.
- Forex+ weekly forecast – Outlook for the major events of the week.
Safe trading!
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