USD/CAD Forecast March 1-5 – US Dollar Bounces Back

The Canadian dollar posted sharp losses at the end of the week and USD/CAD rose close to 1 percent on the week. There are four events in the upcoming week, including GDP. Here is an outlook for the highlights and an updated technical analysis for USD/CAD.  

Canada’s data calendar was light last week. Corporate Profits posted a second straight gain, at 7.9%. On the inflation front, the Raw Materials Price Index rose 5.7%, above expectations and its highest gain since January.

In the US, Fed Chair Powell had a dovish message for the markets in his testimony before Congress.  Second-estimate GDP for Q4 came in at 4.1%, revised upwards from 4.1%. There was positive news from Durable Goods reports, with strong acceleration in January. The headline read jumped 3.4% while Core Durable Goods rose 1.4%.

USD/CAD daily graph with resistance and support lines on it (FXC,UDN). 

  1. Manufacturing PMI: Monday, 14:30. Manufacturing remains in expansionary territory, with readings above the neutral 50-level. The PMI slowed to 54.4 in January, down from 57.9. We now await the February data.
  2. GDP: Tuesday, 14:30. Canada releases its GDP on a monthly basis. In November, GDP rose to 0.7%, up from 0.4% beforehand. However, GDP is expected to slow to 0.1% in December.
  3. Building Permits: Wednesday, 13:30. Building Permits has been showing significant swings. In December, the indicator came in at -4.1% and the January forecast stands at 1.0%.
  4. Ivey PMI: Friday, 15:00. The PMI has been contracting for two successive months, with readings below the 50-level. Another contraction is projected for February, with an estimate of 49.2.

Technical lines from top to bottom:

We start at 1.3041, an important monthly resistance line.

1.2911 was last tested in resistance in mid-December.

1.2804 is next.

1.2710 is an immediate support level.

1.2620 is protecting the round number of 1.2600.

1.2459 (mentioned last week) has held in support since February 2018.

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