USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
It was a dismal week for the Canadian dollar, which plunged almost 4 percent. USD/CAD went as high as 1.4667 before recovering late in the week. There is only one event on the calendar. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.
In Canada, manufacturing sales contracted for a fifth straight month, with a decline of -0.2% in January. This was an improvement compared to the previous reading of -0.2%. Consumer inflation edged up to 0.4% in February, up from 0.3% in January. Core CPI, which excludes the most volatile items in CPI, improved to 0.7%, up from 0.4% a month earlier. Retail sales reports were mixed. Core retail sales declined by 0.1% in January, compared to 0.5% a month earlier. The headline release bounced back with a gain of 0.4%, after a reading of zero.
In the U.S., the Fed slashed rates at the start of the week, from 1.25% to 0.25 percent. This emergency cut was in response to the meltdown in the financial markets. Later in the week, the Fed announced it was establishing a Commercial Paper Funding Facility, in order to keep credit flowing to the economy. On the manufacturing front, the Empire State Manufacturing Index plunged by -21.5 points, compared to the forecast of +5.1 points. Core retail sales fell by 0.4%, while retail sales declined by -0.5%.
- Wholesale Sales: Monday, 12:30. Wholesale sales is a leading indicator of consumer spending. After two straight declines, the indicator rebounded with a strong gain of 0.9%, above the estimate of 0.5%. We now await the January data.
USD/CAD Technical Analysis
Technical lines from top to bottom:
With USD/CAD climbing sharply last week, we start at higher levels:
We begin with resistance at 1.4754. This line was a cushion back in May 2000.
1.4584 is next.
1.4480 was an important cushion in April 2000.
1.4310 was tested last week. It is currently an immediate support level.
1.4159 (mentioned last week) has switched to a support role for the first time since January 2016.
1.4019 is protecting the symbolic 1.400 level. It is the final support line for now.
I remain bullish on USD/CAD
The meltdown in the financial markets is not showing any signs of easing up, which means that minor currencies like the Canadian dollar will likely remain under pressure.
Further reading:
- EUR/USD forecast – for everything related to the euro.
- GBP/USD forecast – Pound/dollar projections.
- AUD/USD forecast – analysis for the Aussie dollar.
- USD/CAD forecast – Canadian dollar predictions.
- Forex+ weekly forecast – Outlook for the major events of the week.
Safe trading!
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