The Canadian dollar surged last week, gaining close to 200 points against the US dollar. USD/CAD closed the week just above the 1.35 line, its lowest level in 11 weeks. This week’s highlights are GDP and Trade Balance. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
The US had a mixed week, as employment and housing reports missed expectations, but there was some positive news from the manufacturing sector, as durable goods sparkled. There were no major Canadian releases last week.
[do action=”autoupdate” tag=”USDCADUpdate”/]USD/CAD daily graph with support and resistance lines on it. Click to enlarge:
- Current Account: Monday, 13:30. Current Account is closely linked to currency demand, as foreigners must purchase Canadian dollars in order to buy Canadian goods and services. The current account deficit narrowed in Q3 to C$16.2 billion, but this was higher than the estimate of C$15.2 billion. The deficit is expected to widen in Q4, with a forecast of C$16.8 billion.
- RMPI: Monday, 13:30. This indicator is a key gauge of inflation in the manufacturing sector. The index has struggled, with two straight declines. The January release came in at -5.0%, its sharpest drop in four months. This was much higher than the estimate of -3.8%.
- GDP: Tuesday, 13:30. Canada releases GDP on a monthly basis. The January reading improved to 0.3%, matching the forecast. GDP is expected to soften in February, with an estimate of 0.1%.
- RBC Manufacturing PMI: Tuesday, 14:30. This PMI has not cracked above the 50-point line since July 2015, indicative of ongoing contraction in the manufacturing sector. In the January release, the index improved to 49.3 points.
- Trade Balance: Friday, 13:30. Canada continues to posts trade deficits, but the indicator improved in December to C$-0.6 billion, much lower than the estimate of C$-2.2 billion. The estimate for the January report stands at C$-1.0 billion.
- Labor Productivity: Friday, 13:30. Labor productivity is an important indicator, as it is directly linked to labor-related inflation. The indicator improved to 0.1% in Q3, compared to -0.6% in Q2. The upswing is expected to continue in the fourth quarter, with an estimate of 0.2%.
- Ivey PMI: Friday, 15:00. The week wraps up with Ivey PMI, a survey of purchasing managers. The index surged to 66.0 points in January, crushing the estimate of 50.3 points. Will the indicator post another strong reading in February?
USD/CAD Technical Analysis
USD/CAD opened the week at 1.3789 and climbed to a high of 1.3859, as resistance held firm at 1.3900 (discussed last week). The pair then reversed directions and dropped all the way to 1.3501. USD/CAD closed the week at 1.3506.
Live chart of USD/CAD: [do action=”tradingviews” pair=”USDCAD” interval=”60″/]
Technical lines, from top to bottom
With USD/CAD posting strong losses, we start at lower levels:
We begin with resistance at the round number of 1.39. This line was tested last week.
1.3784 was a cushion in February.
1.3620 has switched to resistance following sharp losses by USD/CAD.
1.3457 is a weak support level which could see action early in the week.
1.3353 has held firm since early December.
1.3213 is next.
1.3064 is protecting the symbolic 1.30 line. It is the final support line for now.
I am neutral on USD/CAD
In the US, recent figures have shown improvement, so the US economy may be back on track after a lukewarm start to 2016. The Canadian dollar received a big boost as oil prices moved upwards, but with global supplies far outweighing demand, this trend may not last very long.
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Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For the kiwi, see the NZDUSD forecast.
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