USD/CAD Forecast May 31-June 4 – Will Canada GDP boost Canadian dollar?

The Canadian dollar was almost unchanged last week, as USD/CAD remained in 1.20-territory. There are four releases in the upcoming week, including GDP. Here is an outlook for the highlights and an updated technical analysis for USD/CAD.

There was no tier-1 data in Canada last week. In the US, Conference Board Consumer Confidence Consumer Confidence held steady in May, at 117.2. This was down marginally from 117.5 in April. Second-estimate GDP for the first quarter came in unchanged at 6.4%, confirming the initial reading. Unemployment claims fell to a new post-Covid low of 406 thousand, down from 444 thousand. Durable goods orders disappointed with a read of -1.3% in April, its second decline in three months. The PCE index, the Fed’s preferred inflation gauge, jumped to 3.6% in April, up from 2.2%. This could lift the US dollar if investors believe that the Fed will consider tapering QE.

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

Current Account: Tuesday, 12:30. Canada has not posted a current account surplus since 2008. The estimate for Q1 of 2021 stands at C$-8.3 billion.
GDP: Tuesday, 12:30. Canada releases GDP on a monthly basis. After a weak gain of 0.4% in March, the economy is projected to show a gain of 1.0% in April.
Employment Report: Friday, 12:30. The economy shed 207.1 thousand jobs in April and we will now receive the May data. The unemployment rate is expected to tick upwards to 8.2% in May, up from 8.1%.
Ivey PMI: Friday, 14:30. The PMI slowed to 60.6 in April, down sharply from 72.9. We now await the May data.

Technical lines from top to bottom:

1.2267 has held in resistance since late early in May.

1.2205 is next.

1.2136 was tested late in the week.

1.2074 is an immediate line of support.

1.2005 is protecting the symbolic 1.20 level.

1.1943 has held in support since 2015.

1.1874 (mentioned last week) is the final line of support for now.

I am neutral on USD/CAD

The Canadian dollar took a pause last week, but has shown strong gains in the second quarter. With the US economy continuing to improve, any hint of a taper from the Fed could boost the US dollar.

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