USD/CAD Weekly Forecast: The loonie holds its own
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UNLOCK OFFER- Canadian Net Employment collapses in January, unemployment sharply higher.
- WTI rises through $54 resistance to a 12 month high at $56.87.
- Rising oil prices mitigated the USD/CAD effect of a weakening labor market.
- FXStreet Forecast Poll expects offsetting growth in the US and Canadian economies
The Canadian dollar escaped the ramifications of a horrendous January employment report and finished the week nearly at par supported by higher oil prices and weak but not negative US payrolls.
USD/CAD ended at 1.2765 on Friday just points from Monday's open at 1.2777, though a figure below the week's high of 1.2863.
Canada's January Net Change in Employment was -212,8000, far worse than the -47,500 forecast or December's revised 68,200 loss, initially -62,800. The Unemployment Rate climbed to 9.4% from 8.9% in December its highest level since August as the Participation Rate dropped to 64.7% from 64.9%.
In the US January Nonfarm payrolls rose 49,000 even with the 50,000 forecast but December was revised to -227,000 from -140,000 and November to 264,000 from 336,000, a loss of 159,000 jobs over the two months.
Countering the impact on the USD/CAD and the Canadian economy from the lockdown created job losses was the steady rise in the price of West Texas Intermediate (WTI), the North American crude oil pricing standard. From Monday's open at $52.09, WTI finished higher each day, closing on Friday at $56.87 with a 9.2% gain for the week. Crude oil prices have jumped 19.8% this year to Friday from their close at $47.46 on January 4.
Markets are betting that demand for the world economy's main industrial commodity will spike as the pandemic recedes and the recovery takes hold in the second quarter. Oil prices have reentered the $52 to $66 range that prevailed from January 2019 until the pandemic struck a year later.
The break of the secondary down channel on January 27 has proven false in the overall USD/CAD disposition. Friday's close at 1.2765 was below the 1.2804 conclusion on the day of the break, and the inability to challenge resistance at 1.2900 negates any higher bias. The main descending channel which dates to late June is intact and will continue to influence trading, especially after the failure last month.
USD/CAD outlook
The Canadian dollar is in a equivocal position. The abandonment of the dollar safety-trade which had driven the US currency lower for ten months has been replaced since the New Year by a modest rally. Improving US economic data has reflected the optimism over the pandemic as cases and hospitalizations drop swiftly and business spending has expanded to meet the expected revival.
Unlike the euro which has lost 1.6% versus the dollar since January 4 and the yen which has shed 2.2%, the loonie is down a mere 41 points, 0.3%.
Canada is the United States' largest trading partner, prosperity is shared across the border. If the US economy powers up so will Canada's. Canada is also a major energy exporter, as global oil use rises into the recovery so do proceeds to her economy. For example, the cancellation of the Keystone pipe line by the Biden administration does not mean that Canadian oil is unsold but only that it will be transported by more expensive, and unsafe rail cars. The impact on Canada oil production and income is nil.
If a strengthening US economy and rising Treasury rates continue to propel the greenback higher, it should, depending on the relative health of the Canadian economy, gain less against the loonie than other majors. Friday's employment report is evidence of the degree of insulation Canada's resource economy can provide to its currency.
Canada statistics February 1-February 5
Weak Canadian employment was tempered by rising energy prices.
Monday
Markit's Manufacturing PMI for January fell to 54.4 from 57.9 prior, missing the 57 consensus estimate. It was the weakest reading since July.
Friday
Net Change in Employment lost 212,800 positions in January, almost five times as many as the -47,500 forecast and triple the December decrease. The Unemployment Rate rose to 9.4% from 8.9% and the Participation Rate slipped to 64.7% from 64.9%. Average Hourly Wages rose 5.87% on the year in January from 5.37% prior. The Ivey PMI climbed to 55.7 in January from 53.9. Exports rose to C$47.32 billion in December from C$46.6 billion and billion and Imports fell to C$48.98 billion from C$50.16 billion.
US statistics February 1-February 5
American economic statistics, Initial claims and Employment PMI were better than expected, Nonfarm Payrolls was as forecast but worse in revision. The improved data translated to a rising US dollar.
Monday
The Purchasing Managers' Index (PMI) from the Institute for Supply Management slipped to 58.7 missing the 60 forecast and December was revised to 60.5 from 60.7. The New Orders Index dropped to 61.1 from 67.5 in December. The Employment Index rose to 52.6 in January, its highest in 19 months and December was revised to 51.7 from 51.5. Construction Spending climbed 1% in December from 1.1% prior and a 0.9% forecast. Total Vehicle Sales were 16.6 million annualized in January up from 16.3 in December and the highest since February.
Wednesday
ADP Employment Change added 174,000 positions in January more than three times the 49,000 prediction. December's loss was adjusted to -78,000 from -123,000. Services PMI rose to 58.7 in January from a 58 forecast and December score. The Employment Index jumped to 55.2 in January from 48.7 in December, far outstripping the 49.7 estimate. It was the best reading since February's 55.7. New Orders rose to 61.8 in January from 58.6 also far ahead of the 55.2 forecast.
Thursday
Initial Jobless Claims were 779,000 in the January 29 week, much lower than the 830,000 forecast and the prior week was revised to 812,000 from 847,000. Continuing Claims fell to 4.592 million in the January 22 week the lowest of the pandemic, from 4.785 million previous, 4.7 million had been projected. Factory Orders rose 1.1% in December on a 0.7% forecast and a revised 1.3% gain November, originally 1%.
Friday
Nonfarm Payrolls added 49,000 positions in January after losing a revised 227,000 in December (initially -140,000). The November total was adjusted to 264,000 from 336,000. The Unemployment Rate dropped to 6.3% from 6.7%. Average Hourly Earnings rose 0.2% on the month and 5.4% on the year January after December's revised 1% and 5.4% gains. Average Weekly Hours climbed to 35 from 34.7. Employers often give current workers more hours before hiring additional employees. Consumer Credit in December expanded $9.73 billion in December, far less than the $12 billion forecast or November's revised $13.93 billion, initially $15.27 billion.
FXStreet
Canada statistics February 8-February 12
No market moving data this week.
Monday
Housing Starts (YoY) in January are due, they rose 228,300 in December.
Friday
Wholesale Sales for December are forecast to rise 1% after a 0.7% gain in November.
FXStreet
US statistics February 8-February 12
A relatively thin week in the US with Initial Jobless claims in the poll position followed by Michigan Consumer Sentiment. Neither will provoke currency movement.
Tuesday
Jolts Job Opening for December are expected to drop to 6.4 million from 6.527 in November.
Wednesday
The Consumer Price Index (CPI) is expected to add 0.3% on the month and 1.5% on the year in January from 0.4% and 1.4% in December. Core CPI is forecast to rise 0.2% and 1.6% from 0.1% and 1.6%.
Thursday
Initial Jobless Claims are predicted to rise to 814,000 in the February 5 week from 779,000. Continuing Claims are projected to rise to 4.688 million in the January 29 week from 4.592 million prior.
Friday
The Michigan Consumer Sentiment Index (preliminary) is forecast to drop to 75.7 in February from 79 in January.
USD/CAD technical outlook
With the failure of the January 27 break of the narrow channel to produce any upward momentum the main channel is again the ruling formation. It is about three figures from Friday's close at 1.2765 to the upper border of the descending channel and that is a large amount of leeway in which the USD/CAD can rise without changing the overall technical cast.
The cross of the 21-day average on January 29 has not been indicative and at 1.2744 it joins initial support at 1.2740. The 100-day average at 1.2971 is a precursor to resistance at 1.3000 and the 200-day line at 1.3238 is unimportant. The Relative Strength Index at 49.56 is neutral.
The technical impetus of the descending channel is weak with the USD/CAD situated near the middle. The competing fundamental stories of the US and Canadian economies and their recoveries will have more to say on the evolution of the USD/CAD in the next week.
Resistance: 1.2825; 1.2865; 1.2900; 1.2935
Support: 1.2740; 1.2700; 1.2630
USD/CAD Forecast Poll
The FXStreet Forecast Poll expects a bounce above1.2800 next week but an inability to gain any meaningful ground after that.The major resistance at 1.2900 is not approached and after a quarter there is no change in the USD/CAD. This view balances the gains in the respective economies leaving the USD/CAD impassive.
- Canadian Net Employment collapses in January, unemployment sharply higher.
- WTI rises through $54 resistance to a 12 month high at $56.87.
- Rising oil prices mitigated the USD/CAD effect of a weakening labor market.
- FXStreet Forecast Poll expects offsetting growth in the US and Canadian economies
The Canadian dollar escaped the ramifications of a horrendous January employment report and finished the week nearly at par supported by higher oil prices and weak but not negative US payrolls.
USD/CAD ended at 1.2765 on Friday just points from Monday's open at 1.2777, though a figure below the week's high of 1.2863.
Canada's January Net Change in Employment was -212,8000, far worse than the -47,500 forecast or December's revised 68,200 loss, initially -62,800. The Unemployment Rate climbed to 9.4% from 8.9% in December its highest level since August as the Participation Rate dropped to 64.7% from 64.9%.
In the US January Nonfarm payrolls rose 49,000 even with the 50,000 forecast but December was revised to -227,000 from -140,000 and November to 264,000 from 336,000, a loss of 159,000 jobs over the two months.
Countering the impact on the USD/CAD and the Canadian economy from the lockdown created job losses was the steady rise in the price of West Texas Intermediate (WTI), the North American crude oil pricing standard. From Monday's open at $52.09, WTI finished higher each day, closing on Friday at $56.87 with a 9.2% gain for the week. Crude oil prices have jumped 19.8% this year to Friday from their close at $47.46 on January 4.
Markets are betting that demand for the world economy's main industrial commodity will spike as the pandemic recedes and the recovery takes hold in the second quarter. Oil prices have reentered the $52 to $66 range that prevailed from January 2019 until the pandemic struck a year later.
The break of the secondary down channel on January 27 has proven false in the overall USD/CAD disposition. Friday's close at 1.2765 was below the 1.2804 conclusion on the day of the break, and the inability to challenge resistance at 1.2900 negates any higher bias. The main descending channel which dates to late June is intact and will continue to influence trading, especially after the failure last month.
USD/CAD outlook
The Canadian dollar is in a equivocal position. The abandonment of the dollar safety-trade which had driven the US currency lower for ten months has been replaced since the New Year by a modest rally. Improving US economic data has reflected the optimism over the pandemic as cases and hospitalizations drop swiftly and business spending has expanded to meet the expected revival.
Unlike the euro which has lost 1.6% versus the dollar since January 4 and the yen which has shed 2.2%, the loonie is down a mere 41 points, 0.3%.
Canada is the United States' largest trading partner, prosperity is shared across the border. If the US economy powers up so will Canada's. Canada is also a major energy exporter, as global oil use rises into the recovery so do proceeds to her economy. For example, the cancellation of the Keystone pipe line by the Biden administration does not mean that Canadian oil is unsold but only that it will be transported by more expensive, and unsafe rail cars. The impact on Canada oil production and income is nil.
If a strengthening US economy and rising Treasury rates continue to propel the greenback higher, it should, depending on the relative health of the Canadian economy, gain less against the loonie than other majors. Friday's employment report is evidence of the degree of insulation Canada's resource economy can provide to its currency.
Canada statistics February 1-February 5
Weak Canadian employment was tempered by rising energy prices.
Monday
Markit's Manufacturing PMI for January fell to 54.4 from 57.9 prior, missing the 57 consensus estimate. It was the weakest reading since July.
Friday
Net Change in Employment lost 212,800 positions in January, almost five times as many as the -47,500 forecast and triple the December decrease. The Unemployment Rate rose to 9.4% from 8.9% and the Participation Rate slipped to 64.7% from 64.9%. Average Hourly Wages rose 5.87% on the year in January from 5.37% prior. The Ivey PMI climbed to 55.7 in January from 53.9. Exports rose to C$47.32 billion in December from C$46.6 billion and billion and Imports fell to C$48.98 billion from C$50.16 billion.
US statistics February 1-February 5
American economic statistics, Initial claims and Employment PMI were better than expected, Nonfarm Payrolls was as forecast but worse in revision. The improved data translated to a rising US dollar.
Monday
The Purchasing Managers' Index (PMI) from the Institute for Supply Management slipped to 58.7 missing the 60 forecast and December was revised to 60.5 from 60.7. The New Orders Index dropped to 61.1 from 67.5 in December. The Employment Index rose to 52.6 in January, its highest in 19 months and December was revised to 51.7 from 51.5. Construction Spending climbed 1% in December from 1.1% prior and a 0.9% forecast. Total Vehicle Sales were 16.6 million annualized in January up from 16.3 in December and the highest since February.
Wednesday
ADP Employment Change added 174,000 positions in January more than three times the 49,000 prediction. December's loss was adjusted to -78,000 from -123,000. Services PMI rose to 58.7 in January from a 58 forecast and December score. The Employment Index jumped to 55.2 in January from 48.7 in December, far outstripping the 49.7 estimate. It was the best reading since February's 55.7. New Orders rose to 61.8 in January from 58.6 also far ahead of the 55.2 forecast.
Thursday
Initial Jobless Claims were 779,000 in the January 29 week, much lower than the 830,000 forecast and the prior week was revised to 812,000 from 847,000. Continuing Claims fell to 4.592 million in the January 22 week the lowest of the pandemic, from 4.785 million previous, 4.7 million had been projected. Factory Orders rose 1.1% in December on a 0.7% forecast and a revised 1.3% gain November, originally 1%.
Friday
Nonfarm Payrolls added 49,000 positions in January after losing a revised 227,000 in December (initially -140,000). The November total was adjusted to 264,000 from 336,000. The Unemployment Rate dropped to 6.3% from 6.7%. Average Hourly Earnings rose 0.2% on the month and 5.4% on the year January after December's revised 1% and 5.4% gains. Average Weekly Hours climbed to 35 from 34.7. Employers often give current workers more hours before hiring additional employees. Consumer Credit in December expanded $9.73 billion in December, far less than the $12 billion forecast or November's revised $13.93 billion, initially $15.27 billion.
FXStreet
Canada statistics February 8-February 12
No market moving data this week.
Monday
Housing Starts (YoY) in January are due, they rose 228,300 in December.
Friday
Wholesale Sales for December are forecast to rise 1% after a 0.7% gain in November.
FXStreet
US statistics February 8-February 12
A relatively thin week in the US with Initial Jobless claims in the poll position followed by Michigan Consumer Sentiment. Neither will provoke currency movement.
Tuesday
Jolts Job Opening for December are expected to drop to 6.4 million from 6.527 in November.
Wednesday
The Consumer Price Index (CPI) is expected to add 0.3% on the month and 1.5% on the year in January from 0.4% and 1.4% in December. Core CPI is forecast to rise 0.2% and 1.6% from 0.1% and 1.6%.
Thursday
Initial Jobless Claims are predicted to rise to 814,000 in the February 5 week from 779,000. Continuing Claims are projected to rise to 4.688 million in the January 29 week from 4.592 million prior.
Friday
The Michigan Consumer Sentiment Index (preliminary) is forecast to drop to 75.7 in February from 79 in January.
USD/CAD technical outlook
With the failure of the January 27 break of the narrow channel to produce any upward momentum the main channel is again the ruling formation. It is about three figures from Friday's close at 1.2765 to the upper border of the descending channel and that is a large amount of leeway in which the USD/CAD can rise without changing the overall technical cast.
The cross of the 21-day average on January 29 has not been indicative and at 1.2744 it joins initial support at 1.2740. The 100-day average at 1.2971 is a precursor to resistance at 1.3000 and the 200-day line at 1.3238 is unimportant. The Relative Strength Index at 49.56 is neutral.
The technical impetus of the descending channel is weak with the USD/CAD situated near the middle. The competing fundamental stories of the US and Canadian economies and their recoveries will have more to say on the evolution of the USD/CAD in the next week.
Resistance: 1.2825; 1.2865; 1.2900; 1.2935
Support: 1.2740; 1.2700; 1.2630
USD/CAD Forecast Poll
The FXStreet Forecast Poll expects a bounce above1.2800 next week but an inability to gain any meaningful ground after that.The major resistance at 1.2900 is not approached and after a quarter there is no change in the USD/CAD. This view balances the gains in the respective economies leaving the USD/CAD impassive.
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