USD/CAD Forecast Feb. 1-5 – Canada dollar drifting

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USD/CAD continues to show limited movement. There are three events on the calendar in the upcoming week, including Employment Change. Here is an outlook for the highlights and an updated technical analysis for USD/CAD.  
Canada Building Permits showed a decline of 4.1% in December, the second decline in three months. Canada GDP in November was unexpectedly strong with a gain of 0.7%, up from 0.4%. This reading easily beat the forecast of 0.4%. The Raw Materials Price Index jumped 3.5% in December, its highest level in six months.
In the US, CB Consumer Confidence rose to 89.3, up from 87.1 beforehand. Durable Goods Orders continued to slip, falling to 0.2% in December. This was well short of the forecast of 1.0%. The Federal Reserve policy meeting reiterated a dovish stance and Fed Chair Powell poured cold water on speculation that the Fed would taper its QE program in the near future. Advance GDP for Q1 posted a respectable gain of 4.0%, close to the estimate of 4.2%.
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USD/CAD daily graph with resistance and support lines on it. Click to enlarge:

  1. Manufacturing PMI: Monday, 14:30. Manufacturing continues to hum, with the PMI posting releases well into expansionary territory. The November reading improved to 57.9, its highest level in more than nine years. Will the upswing continue in December?
  2. Employment Report: Friday, 13:30. Canada’s economy shed 62.6 thousand in November, its first decline since April. The unemployment rate nudged higher to 8.6% up from 8.5%. We now await the December numbers.
  3. Ivey PMI: Friday, 15:00. The PMI was weaker than expected and fell into contraction territory in December, with a reading of 46.7, down from 52.7. This was well short of the estimate of 53.1.

Technical lines from top to bottom:

We start with resistance at 1.3034.

1.2916 switched to resistance at the start of December, when USD/CAD started its slide.

1.2825 is next.

1.2707 is the first support level.

1.2616 is next.

1.2498 has held in support since February 2018.

1.2422 (mentioned last week) is the final support level for now.

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I am neutral on USD/CAD

The US dollar has bounced back after a weak Q4 in 2020 and has held its own in early 2021. This week’s key events, including Canada Employment Change, could have a significant impact on the direction of the pair this week.

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Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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