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The Canadian dollar posted slight gains last week, as USD/CAD broke below the 1.30 mark for the first time since January. There are three releases in the upcoming week, including the Bank of Canada rate decision. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.

In Canada, it was another positive month for manufacturing, as Manufacturing PMI rose to 55.1, up from 52.9 beforehand. A reading above the 50-level indicates expansion. Canada’s trade deficit narrowed to C$2.5 billion, down from C$3.2 billion. On the employment front, Canada created 245.8 thousand jobs, down from 418.5 thousand a month earlier. As well, the unemployment rate fell from 10.9% to 10.2%, marking a 5-month low.

In the US, Manufacturing PMI improved to 56.0, up from 54.2. The Services PMI also pointed to expansion, but slowed to 56.9, down from 58.1 beforehand. Unemployment claims dropped below the 1-million mark with a reading of 886 thousand. Nonfarm payrolls slowed to 1.371 million, but was very close to the estimate of 1.374 million. The unemployment rate fell sharply to 8.4%, down from 10.2%. This marked the first single-digit reading since April, prior to the Corvid-19 pandemic. There was more good news from wage growth, which rose from 02% to 0.4%.

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

  1. Housing Starts: Wednesday, 12:15. Housing Starts jumped to 246 thousand in July, up from 212 thousand beforehand. The estimate for August stands at 222 thousand.
  2. BoC Rate Decision: Wednesday, 14:00. The Canadian economy is showing signs of recovery, but the BoC is unlikely to change rate levels anytime soon. We can expect the bank to maintain rates at 0.25%, where they have been pegged since March. The tone of the rate statement could affect the movement of USD/CAD.
  3. Capacity Utilization Rate: Friday, 12:30. This measure of the industry provides the BOC insights on the level of slack in the economy. Utilization has slowed for three straight quarters and dropped below the 80-level in Q1, with a reading of 79.8%. Will we see an improvement in the Q2 release?
  • All times are GMT

USD/CAD Technical Analysis

Technical lines from top to bottom:

1.3420 (mentioned  last week) has held in resistance since the first week in August.

1.3330 is next.

1.3230 has some breathing room in resistance.

1.3128 remains relevant.

1.3016 is the first support level.

1.2935 is next.

1.2841 has provided support since October 2018.

1.2742 is the final support level for now.


I remain bearish on USD/CAD

It was a quiet week for USD/CAD, but the trend has been downwards for the pair in recent weeks. The Canadian economy continues to show signs of recovery, and investors have shown positive sentiment towards minor currencies like the loonie.

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