USD/CAD Forecast Feb. 18-22 – Canadian dollar steady, but manufacturing sputters

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USD/CAD closed the week almost unchanged, in sharp contrast to the previous two weeks. This week’s key events are retail sales reports. Here is an outlook for the highlights of this week and an updated technical analysis for USD/CAD.

The global trade war has hurt manufacturing industries worldwide, and Canada has not been immune. Canadian manufacturing sales fell 1.3% in December, after a decline of 1.4% in November. Foreign investors reduced their holdings in Canadian securities by $19 billion in December, marking the first decline since in a year. In the U.S., consumer spending had a dismal January, with retail sales and core retail sales recording sharp declines.

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:

  1. ADP Nonfarm Employment Change: Thursday, 13:30. Canada’s labor market is in good shape, as the economy created 66.6 thousand jobs. The ADP release has not been as favorable, with two declines in the past three months.
  2. Retail Sales Data: Friday, 13:30. Retail sales is the primary gauge of consumer spending, a key factor in economic activity. Consumer spending has been weak in the fourth quarter and investors are braced for more soft numbers. The estimate for December retail sales stands at -0.5% and the core retail sales is projected to come in at 0.0%.

*All times are GMT

USD/CAD Technical Analysis

USD/CAD was unable to make much headway in either direction. 1.3350 (mentioned last week) held in resistance.

Technical lines from top to bottom:

We start with resistance at 1.3757.

1.3662 marked a high point at the start of January, when the Canadian dollar rallied in the first week of the year.

1.3560 capped USD/CAD in May 2017. Next, 1.3445 was the peak in early December.

1.3385 was the high point seen in May. 1.3350 was a stepping stone on the way and on the way down around the same time.

Lower, 1.3265 was the high point in mid-November. 1.3225 was tested in support in the middle of the week.

1.3175 was a swing low in late November. It is followed by 1.3125 which was also a low point, earlier in the month.

1.2970 is just below the round level of 1.3000 level. This line was a trough in late October.

I remain bullish on USD/CAD

The manufacturing sector has sputtered, as the global trade war has lessened the demand for Canadian exports. As well, low oil prices are weighing on the economy and on the Canadian dollar. The currency has slipped 1.2% in February. The Bank of Canada is unlikely to raise rates at the March 6 meeting, but there is room for rate hikes later in the year if economic growth improves.

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About Author

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.