The Canadian dollar reversed directions and posted strong gains, as USD/CAD dropped below the 1.27 level. There are three events this upcoming week, including the Bank of Canada rate decision. Here is an outlook for the highlights and an updated technical analysis for USD/CAD.  

Canada Manufacturing PMI remains well into expansionary territory and rose to 54.8 in January, up from 54.4. The economy showed very little growth in December, with a gain of 0.1%.

In the US, ISM PMIs remained in expansion territory in February. Manufacturing PMI rose to 60.8, up from 58.7 beforehand. This marked its highest level since August 2018. Services PMI slowed to 55.3, down from 58.7. The week wrapped up with Nonfarm Employment Change, which shined with a reading of 397,000, crushing the estimate of 197,000. The unemployment rate edged lower to 6.2%, down from 6.3%.

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

1. Bank of Canada Rate Decision: Wednesday, 15:00. The BoC is expected to maintain the Overnight Rate at 0.25%, where it has been pegged since March. A hawkish rate statement would be bullish for the Canadian dollar.
2. Employment Report: Friday, 13:30. Canada’s labor market has sagged lately, and the January release of -212,800 was a disaster. Unemployment rose to 9.4%, up sharply from 8.6%. We now await the February data.
3. Wholesale Sales: Friday, 13:30. Wholesale Sales slipped by 1.3% in December but is expected to rebound in January, with an estimate of 0.4%.

Technical lines from top to bottom:

We start at 1.2911, which was last tested in resistance in mid-December.

1.2827 is next.

1.2750 has some breathing room in resistance after sharp losses by the pair last week.

1.2620 is an immediate support level.

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

1.2373 is the final support level for now.

I am bearish on USD/CAD

The massive Biden stimulus program was approved by the Senate and will become law shortly, With a huge number of dollars being injected into the economy, the US dollar could be under pressure. As well, with the Covid vaccine programs continuing, risk sentiment remains solid, which is bullish for the Canadian dollar.