USD/CAD Forecast April 27-May 1 – Soft GDP Could Weigh On Wobbly Canadian Dollar
Retail sales slipped in February to 0.3%, down from 0.6% a month earlier. Core retail sales edged lower to a flat 0.0%, down from 0.1%. Inflation numbers in March were dismal. CPI rose 0.9% year-over-year, down from 2.2% in February.
On a seasonally adjusted monthly basis, CPI declined by 0.9%, its biggest decline since the indicator was created in 1992. Trimmed CPI, which excludes the most volatile items in CPI, slowed to 1.8%, down from 2.0%. It was the first time the indicator has fallen below the 2% threshold since February 2019.
In the U.S., jobless claims dropped to 4.4 million, down from 5.5 million a week earlier. In the past five weeks, new jobless claims have totaled a staggering 26 million, as the COVID-19 crisis has shut down much of the U.S. economy.
There was more bad news from March durable goods orders, which plunged by 14.4%, its first decline in four months. The core reading declined by 0.2%, after a decline of 0.6%. The UoM Consumer Sentiment slumped to 71.8, down sharply from 89.1 a month earlier. Still, this beat the estimate of 67.8 points.
USD/CAD daily chart with support and resistance lines on it.
- GDP: Thursday, 12:30. Canada releases GDP on a monthly basis. Canada’s economy slowed to 0.1% in January, down from 0.3% a month earlier. The downturn is expected to continue with a forecast of 0.0%.
- Raw Materials Price Index: Thursday, 12:30. The indicator has posted back-to-back declines, as inflation levels remain low. In February, the index fell by 4.7%; worse than the estimate of -2.0%. This marked the sharpest decline since July, 2019.
- Manufacturing PMI: Friday, 13:30. After six successive readings pointing to expansion, the indicator slipped below the 50.0 level in March, falling to 46.1 points. Will we see an improvement in the upcoming release?
USD/CAD Technical Analysis
Technical lines from top to bottom:
- 1.4480 was an important cushion in April. 1.4310 is next.
- 1.4159 has some breathing room in resistance.
- 1.4019 has switched to support, after USD/CAD gained ground last week.
- The round number of 1.39 has some breathing room in support. 1.3757 is next.
- 1.3660 is the final support level for now.
I remain bullish on USD/CAD
The outlook for the Canadian dollar remains negative, as economic numbers are reflecting the economic fallout due to COVID-19. Risk appetite for minor currencies like the Canadian dollar remains weak. As well, low oil prices are also weighing on the Canadian dollar.
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