USD/CAD Forecast February 10-17 – Canada, U.S. Posts Strong Job Numbers

USD/CAD pushed above the 1.33 line last week as the pair touched its highest level in 11 weeks. The upcoming week features two events, both in the construction sector. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.

Canada posted strong job numbers in January. The economy created above 34,500 jobs in January, close to the reading of 35.2 a month earlier. This easily beat the estimate of 16,300. As well, the unemployment rate dropped to 5.5%, down from 5.7% in December. Analysts had forecast a reading of 5.7%.

The ISM Manufacturing PMI, a key indicator, rose to 50.9 in January, up from 47.2 a month earlier. This figure beat the forecast of 48.5 points. This marked the first showing expansion since July. The week wrapped up with employment data, which was mixed. Wage growth came in at 0.2%, shy of the estimate of 0.3%. Nonfarm payrolls sparkled with a gain of 225,000. This was much stronger than the forecast of 163,000.

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

1. Housing Starts: Monday, 13:15. Housing Starts slipped to 197,000 in January, falling below the 200,000 level for the first time since March 2019. The February estimate stands at 200,000.
2. Building Permits: Monday, 13:30. Building Permits have declined for three consecutive months, pointing to weakness in the construction industry. In November, the indicator declined by 2.4%, missing the forecast of a 1.0% gain. Analysts are expecting a rebound in December, with a forecast of a 3.5% gain.

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3660, which held since December 2018. 1.3550 is next.

1.3445 has remained intact since June 2019. This is followed by 1.3385.

The round number of 1.3300 has served in a resistance role since early December.

1.3265 has switched to a support role following gains by USD/CAD last week.

1.3150 is the next support level.

1.3100 (mentioned last week) has some breathing room in support.

1.3048 is protecting the symbolic 1.3000 level.

1.2950 is the final support level for now.

I remain bullish on USD/CAD

The Canadian dollar slipped 2 percent in January and continues to lose ground so far in February. With the coronavirus continuing to cause turmoil in global markets, risk appetite is likely to remain weak, which is bearish for the Canadian dollar.