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USD/CAD declined by almost 3 percent last week, as the pair briefly broke above the symbolic 1.40 level. There are four events in the upcoming week. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.
The week ended in dramatic fashion, as the Bank of Canada slashed rates by 50 points for the second time in a week, lowering the benchmark rate to 0.75%. This move marked the first unscheduled cut since the financial crisis in 2008. BoC Governor Stephen Poloz said the move was intended as a “bridge across the trouble” and said that rates could be cut again if needed.
In the U.S., President Trump banned flights from Europe, which sapped risk appetite and weighed on the Canadian dollar. Inflation levels remained low in February, with CPI coming in at 0.1% and Core CPI at 0.2%. Consumer confidence dropped sharply in February, falling from 100.9 to 95.9 points.

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

  1. Manufacturing Sales: Tuesday, 12:30. This key manufacturing indicator has sputtered, with four consecutive declines. The December reading of -0.7% was well off the forecast of 0.8%. Will we see a rebound in January?
  2. Inflation: Wednesday, 12:30. Consumer inflation improved to 0.3% in January, up from 0.0% a month earlier. This figure beat the estimate of 0.2%. Trimmed CPI, which excludes the most volatile items in CPI, has posted two straight readings of 2.1%. We now await the February data.
  3. ADP Non-Farm Employment Change: Thursday, 12:30. The ADP reading slipped to 25.9 thousand in January, down from 46.2 thousand a month earlier. Investors will be hoping for a stronger reading in February.
  4. Retail Sales: Friday, 12:30. Retail sales reports were mixed in December. The headline figure slipped to 0.0%, down sharply from 0.9% in the previous release.This reading was shy of the forecast of 0.1%. Core retail sales improved to 0.5%, up from 0.2% in November and above the estimate of 0.4%. We will now receive the January readings.

USD/CAD Technical Analysis

Technical lines from top to bottom:

We begin with resistance at 1.4159.

1.4019 has held since January 2016.

The round number of 1.39 is next.

1.3757 is a weak support level.

1.3660 (mentioned  last week) has switched to a support role for the first time since December 2018.

1.3550 is next.

1.3420 is the final support level for now.

I remain bullish on USD/CAD

Investor risk appetite remains weak as the coronavirus continues to take its toll on the global economy. With the BoC slashing a staggering 1.0% from the benchmark rate in just 9 days, the Canadian dollar has become less attractive to investors.

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