USD/CAD Forecast Feb. 22-26 – Canadian dollar rally continues

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The Canadian dollar gained more ground last week, as USD/CAD dipped below the 1.26 line for the first time since mid-January. There are only two events in the upcoming week. Here is an outlook for the highlights and an updated technical analysis for USD/CAD.  

Canada Housing Sales and Manufacturing Sales both improved and easily beat expectations. There was good news on the inflation front, as headline CPI rose 0.6% in January, up from -0.2% beforehand. Core CPI gained 0.5%, its best showing since February 2020. The week ended on a sour note, as December retail sales sank. Headline retail sales fell by 3.4% while core retail sales declined by 4.1%. Both releases were weaker than expected.
In the US, January retail sales pointed to a strong rebound in consumer spending. The headline read jumped 5.3% while core retail sales came in at 5.9%. The forecast for both releases stood at 1.1%. The FOMC minutes reiterated a dovish message from the Fed, which signaled that it has no plans to taper QE anytime soon. Services and manufacturing remain well into expansionary territory, as the January PMIs came in at 58.5 and 58.9, respectively.
USD/CAD daily graph with resistance and support lines on it. Click to enlarge:
  1. Corporate Profits: Wednesday, 13:30. Corporate Profits soared 44.9% in Q4 of 2020, after two straight declines. Will we see another gain for the first quarter of the year?
  2. Raw Materials Price Index: Friday, 13:30. This inflation indicator jumped 3.5% in December, up from 0.6% beforehand. We now await the January data.

Technical lines from top to bottom:

We start at 1.3041, an important monthly resistance line.

1.2916 (mentioned last week) was last tested in resistance in mid-December.

1.2834 has held in resistance since the first week in February.

1.2712 is next.

1.2587 is the first support level. It could break early in the week if the pair’s downtrend continues.

1.2459 has held in support since February 2018.

1.2329 is the final support level for now.

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I am bearish on USD/CAD

The Canadian dollar has now reeled off three winning weeks against the US dollar, which remains under pressure. With the Biden stimulus package set to be approved by Congress shortly, the US dollar could continue to retreat.

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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.