The Canadian dollar recorded a sixth straight winning week, as USD/CAD continues to lose ground. The upcoming week has only one event, Manufacturing PMI. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.

The Canadian dollar managed to post gains in a holiday-shortened week and is up 1.4% in the month of December. The sole Canadian event last week, which was GDP, contracted by 0.1% in October. This was the economy’s first decline since February.

In the U.S. durable goods orders plunged 2.0% in November, compared to a gain of 0.6% a month earlier. This was shy of the estimate of +0.2%. The core release, which excludes volatile items such as aircraft orders, slowed to 0.0%, down from 0.6% in October. This figure was well off the estimate of a 1.5% gain. The weak durables reports indicate that the manufacturing sector is showing signs of weakness. On the employment front, unemployment claims dropped sharply for a second straight week, to 222,000. This matched the estimate.

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

1. Manufacturing PMI: Thursday, 14:30. The index has shown slight improvement, pointing to slight expansion in each of the past three readings. In December, the indicator improved to 51.4, its highest level since February.

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3445, which has remained intact since the first week of June. 1.3385 is next.

The round number of 1.3300 has served in a resistance role since early December. 1.3265 follows.

1.3150 was tested in resistance early in the week, but has some breathing room following strong losses by USD/CAD late last week.

1.3100 (mentioned last week) has switched to a resistance role.

1.3048 is protecting the round number of 1.3000, which has psychological significance.

1.2916 was last tested in October 2018. 1.2830 is next.

1.2730 is the final support level for now.

I remain bearish on USD/CAD

The Canadian dollar continues its impressive December rally. The U.S. and China are set to sign the “Phase 1” trade deal, which has boosted investor risk appetite. As well, crude oil prices have jumped 11.4% in December, which is bullish for the loonie, as Canada is a major oil producer.