USD/CAD Forecast Feb. 4-8 – Canadian dollar improves to 12-week high


USD/CAD posted losses last week, as the Canadian dollar enjoyed a sparkling January. Canadian employment indicators are the key events in the upcoming week. Here is an outlook for the highlights of this week and an updated technical analysis for USD/CAD.

Canadian GDP declined by 0.1% for the second time in three months. These soft numbers haven’t hurt the Canadian dollar, but if economic growth continues to contract, the currency could weaken. In the U.S, employment numbers were mixed. Nonfarm payrolls posted huge gains above the 300K mark for a second successive month. However, wage growth fell to 0.1%, down from 0.4% a month earlier.

The U.S-China trade spat hasn’t been resolved, but the good news is that negotiations are in full swing. Chinese and U.S. officials concluded a second round of trade talks this week, and President Trump said that the sides had made progress. This has raised hopes that further tariffs which the U.S. had threatened to impose on March 1 can be avoided. The stakes are high for Canada, which is heavily reliant on its export sector.

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

  1. Building Permits: Wednesday, 13:30. Building Permits sparkled in November, with a sharp gain of 2.6%. The markets are braced for a decline of 0.4% in December.
  2. Ivey PMI: Wednesday, 15:00. This survey of business activity continues to point to strong expansion. In December, the indicator improved to 59.7 points. The positive trend is expected to continue in January, with an estimate of 60.2 points.
  3. Housing Starts: Friday, 13:15. The indicator dropped slightly to 213 thousand in December, as the indicator continues to post scores above the 200K level. The forecast for January stands at 206 thousand.
  4. Employment Data: Friday, 13:30. The economy created a modest gain of 9.3 thousand a month in December. A strong gain in January could boost the Canadian dollar. The unemployment rate has posted two straight scores of 5.6%.

*All times are GMT

USD/CAD Technical Analysis

USD/CAD started the week with gains, but sharp losses in mid-week trading helped the Canadian dollar post gains last week. The line of 1.3125 (mentioned last week) was tested late in the week but remains a support level.

Technical lines from top to bottom:

With USD/CAD continuing to lose ground last week, we begin at lower levels:

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, as the pair posted strong losses before recovering late in 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.

Below the 1.3000 level, we find the late-October trough of 1.2970.

1.2880 was a double-bottom in September and in August.

I am bullish on USD/CAD

The U.S dollar had a shaky January and this could continue. Risk appetite remains steady and a dovish Fed is weighing on the greenback. With some analysts predicting no rate hikes this year, investors are looking at other assets to park their funds.

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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.

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