In Canada, manufacturing sales contracted for a fifth straight month, with a decline of -0.2% in January. This was an improvement compared to the previous reading of -0.2%. Consumer inflation edged up to 0.4% in February, up from 0.3% in January. Core CPI, which excludes the most volatile items in CPI, improved to 0.7%, up from 0.4% a month earlier. Retail sales reports were mixed. Core retail sales declined by 0.1% in January, compared to 0.5% a month earlier. The headline release bounced back with a gain of 0.4%, after a reading of zero.

In the U.S., the Fed slashed rates at the start of the week, from 1.25% to 0.25%. This emergency cut was in response to the meltdown in the financial markets. Later in the week, the Fed announced it was establishing a Commercial Paper Funding Facility, in order to keep credit flowing to the economy. On the manufacturing front, the Empire State Manufacturing Index plunged by -21.5 points, compared to the forecast of +5.1 points. Core retail sales fell by 0.4%, while retail sales declined by -0.5%.

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

Wholesale Sales: Monday, 12:30. Wholesale sales is a leading indicator of consumer spending. After two straight declines, the indicator rebounded with a strong gain of 0.9%, above the estimate of 0.5%. We now await the January data.

USD/CAD Technical Analysis

Technical lines from top to bottom:

With USD/CAD climbing sharply last week, we start at higher levels:

• We begin with resistance at 1.4754. This line was a cushion back in May 2000.
• 1.4584 is next.
• 1.4480 was an important cushion in April 2000.
• 1.4310 was tested last week. It is currently an immediate support level.
• 1.4159 has switched to a support role for the first time since January 2016.
• 1.4019 is protecting the symbolic 1.400 level. It is the final support line for now.

I remain bullish on USD/CAD

The meltdown in the financial markets is not showing any signs of easing up, which means that minor currencies like the Canadian dollar will likely remain under pressure.