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USD/CAD Forecast May 10-14 – Canadian dollar sparkles but job numbers sink

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By Published: Last Modified: Canadian Dollar Forecast, Minors, Weekly Forex Forecasts
The Canadian dollar recorded another strong week, with gains of 1.26%. USD/CAD dropped to its lowest level since September 2017, as the pair ended the week slightly above the 1.21 level.  There is just one economic release in the upcoming week.  Here is an outlook for the highlights and an updated technical analysis for USD/CAD.  
Canada’s manufacturing sector remains robust, as  Manufacturing PMI for April posted a reading of 57.2. Although this was slightly lower than the previous reading of 58.5, it still points to strong growth.
Canada posted disappointing numbers on Friday.  Employment numbers for May were much worse than expected.  The economy shed 207.1 thousand jobs,  compared to the consensus of a loss of 160.5 thousand.  Unemployment jumped to 8.1%, up from 7.5% and above the forecast of 7.8%.  The Ivey PMI fell to 60.2 in April, down sharply from 72.9 and shy of the estimate of 67.0.  Despite these soft numbers, the Canadian dollar posted gains on Friday.

In the US, manufacturing activity grew at a slower pace in April, as the ISM Manufacturing PMI dropped to 60.7, down from 64.7. It was a similar story for business activity, as the ISM Services PMI slowed to 62.7, down from 63.7. Both PMIs missed their estimates.

The market was ready to celebrate a massive nonfarm payroll report for April, with an estimate of 990 thousand. Some analysts had even predicted a print of two million, but in the end, the economy created just 266 thousand jobs. Unemployment rose to 6.1%, up from 5.8% and above the estimate of 6.0%. There was a silver lining, as wage growth climbed 0.7%, rebounding from -0.1% and above the forecast of 0.0%.

USD/CAD daily graph with resistance and support lines on it. Click to enlarge:
  1. Manufacturing Sales: Friday, 12:30. Manufacturing sales took a downturn in February, with a read of -1.6%. Will we see an improvement in the March data?

Technical lines from top to bottom:

We start with resistance at 1.2446 (mentioned last week).

1.2350 is next.

1.2210 has switched to resistance after sharp losses by USD/CAD last week.

1.2125 is an immediate resistance line.

1.1985 is providing support.

1.1765 is the final support line for now.

I am bullish on USD/CAD

Canada’s weak job numbers last week are an indication that the recovery from Covid is not nearly complete, and this could curb appetite for the Canadian dollar.

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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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