USD/CAD Forecast March 2-6 – Canadian Dollar Slips on Coronavirus Jitters

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USD/CAD jumped 1.3% last week, its strongest weekly gain since February 2019. The upcoming week features the Bank of Canada rate decision. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.
In Canada, GDP showed a gain of 0.3% in December, up from 0.1% a month earlier. Still, this wasn’t enough to prevent a sharp slide by the Canadian dollar. On the inflation front, the Raw Materials Price Index plunged 2.2%, well of the forecast of a 2.1% gain.
Over in the U.S., durable goods orders reports were mixed. The headline figure declined by 0.2%, which beat expectations but was much lower than the gain of 2.4% a month earlier. However, core durable goods orders jumped 0.9%, its strongest gain in seven months. Preliminary (second estimate) GDP came in at 2.1%, confirming the initial estimate.

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

  1. Manufacturing PMI: Monday, 14:30. The index has hovered just above the 50-level in the past two readings, which separates contraction from expansion. This points to stagnation in the manufacturing sector. We now await the February release.
  2. BoC Rate Decision: Wednesday, 15:00. The BoC has kept the benchmark rate pegged at 1.75% since October 2018 and no change is expected at the upcoming meeting. The tone of the rate statement could affect the movement of USD/CAD.
  3. Employment Data: Friday, 13:30. The labor market has looked strong, with the economy creating more than 34 thousand jobs in each of the past two readings. The unemployment rate dropped to 5.5% in January, down from 5.7%. The upcoming employment data could have a significant impact on the movement of USD/CAD.
  4. Trade Balance: Friday, 13:30. Canada continues to record trade deficits. In December, the trade deficit fell to C$0.4 billion, down from C$1.1 billion a month earlier. This marked the smallest deficit since June. Will we see a surplus in the January release?
  5. Ivey PMI: Friday, 15:00. The index jumped to 57.3 in January, well above the estimate of 52.3. Will the upswing continue in February?

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3660, which held since December 2018. 1.3550 is next.

1.3420 has remained intact since June 2019.

1.3330 has switched to support for the first time since December, after strong gains by USD/CAD last week.

1.3265 is next.

1.3150 has strengthened in support.

1.3100 (mentioned last week) is the next support level.

1.3048 is protecting the symbolic 1.3000 level. It is the final support level for now.

I remain bullish on USD/CAD

Investor risk appetite remains weak as the coronavirus has now spread to Europe and the United States. This means that minor currencies like the Canadian dollar are likely to remain under pressure.

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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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