The Canadian dollar enjoyed a strong week, with a gain of 1.2 percent. USD/CADclosed the week just above the 1.39 level. The upcoming week features three events. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.
Canada continues to record trade deficits. In March, the deficit widened to C$1.4 billion, up from C$1.0 billion a month earlier. Still, this figure easily beat the estimate of C$2.5 billion. Employment numbers were by no means strong, but managed to beat the forecasts. The economy lost some 1.99 million jobs in April, but analysts had projected a loss of 4.0 million. The unemployment rate jumped from 7.8% to 13%. This was lower than the estimate of 18 percent.
In the U.S., factory orders fell by 10.3% in March, after a flat 0.0% reading a month earlier. April job numbers were dismal. Unemployment claims came in at 3.16 million, down from 3.8 million a week earlier. This brings the running total to a staggering 33.4 million. Nonfarm payrolls dropped by a record 20.5 million in April, slightly below the estimate of 22.4 million. The unemployment rate jumped to 14.7%, up from 4.4% a month earlier. Still, this beat the forecast of 16.0 percent. There was some good news, as wage growth shot up 4.7%, crushing the estimate of 0.5 percent.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
Manufacturing Sales: Thursday, 12:30. After a nasty streak of five straight declines, manufacturing sales climbed 0.5% in February, above the forecast of 0.0%. Will we see an improvement in the March release?
BoC Financial System Review: Thursday, 14:30. The Bank of Canada publishes its overview of the financial system twice a year. Apart from data about the banks’ situation, the publication also includes economic data. BoC Governor Stephen Poloz will host a follow-up press conference.
Foreign Securities Purchases: Friday, 12:30. The demand for securities by foreigners was much stronger than anticipated in February. The indicator rose to C$20.6 billion, well above the estimate of C$9.0 billion. Will the March release be just as rosy?
USD/CAD Technical Analysis
Technical lines from top to bottom:
We start with resistance at 1.4310.
1.4159 (mentioned last week) has some breathing room in resistance.
1.4019 has switched to a resistance role after strong losses by USD/CAD last week.
The round number of 1.39 has some breathing room in support. 1.3757 is next.
1.3660 has held in support since mid-March, when USD/CAD posted a significant rally.
1.3550 is the final support level for now.
I remain bullish on USD/CAD
The outlook for the Canadian dollar remains negative, despite last week’s strong performance. Economic conditions remain very weak due to Covid-19 and investors are likely to stick with safe-haven assets like the U.S. dollar.
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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