USD/CAD Forecast April 20-24 – Will Dismal Job Numbers Send Loonie Lower?

The Bank of Canada maintained the benchmark rate at 0.25%, as expected. The bank has shaved off a whole percentage point since the first week of March. The ADP nonfarm payrolls pointed to a bleak employment picture, with a huge loss of 177 thousand in March.

In the U.S., consumer spending plunged in March. Retail sales declined by a staggering 8.7%, worse than the estimate of an 8.0% decline. The core reading fell by 4.5%; beating the forecast of 4.9%. The employment market remains in disarray, as employment claims topped the five million mark. On the manufacturing front, the Philly Manufacturing Index plunged to -56.6, compared to -12.7 a month earlier. This was weaker than the estimate of -30.0 points.

USD/CAD daily chart with support and resistance lines on it. 

1. Wholesale Sales: Monday, 12:30. This indicator is a leading indicator of consumer spending. In January, the indicator gained 1.8%, up from 0.9% a month earlier. This was its highest level since January 2017. However, analysts are projecting a decline of 0.2%.
2. Retail Sales: Tuesday, 12:30. The headline figure accelerated to 0.4% in January, up from zero in the previous reading. Core retail sales fell by 0.1% in January, down from 0.5% in December. 
3. Inflation: Wednesday, 12:30. Consumer inflation rose 0.4% in February, up from 0.3%, This marked its highest level since July. The core figure improved to 0.7%, up from 0.4% a month earlier. Will the upswing continue?

USD/CAD Technical Analysis

Technical lines from top to bottom:

• We start with resistance at 1.4310.
• 1.4159 has some breathing room in resistance.
• 1.4019 has switched to a resistance role after USD/CAD lost ground.
• The round number of 1.39 is a weak support line. 1.3757 is next.
• 1.3660 is the final support level for now.

I remain bullish on USD/CAD

The outlook for the Canadian dollar is negative, as the economic fallout from COVID-19 has shut down much of the economic activity in Canada and the United States, its most important trading partner. Weak oil prices are also weighing on the Canadian dollar.