USD/CAD Forecast: Canadian dollar quiet as US, Canada show soft data

USD/CAD is showing little movement in the Thursday session. Currently, the pair is trading at 1.3279, up 0.18% on the day. On the release front, Canadian manufacturing production slipped 1.3%, marking a third straight decline. In the U.S., consumer spending slumped in January. Retail sales fell 1.2% and core retail sales plunged 1.8%. PPI declined 0.1% and unemployment claims jumped to 239 thousand, well above the estimate of 225 thousand. On Friday, Canada releases foreign securities purchases and the U.S. posts UoM consumer sentiment.

Investors are feeling more optimistic over the U.S-China trade war. On Thursday, China announced that exports had jumped 9.1% in January on an annualized basis, compared to the forecast of -3.2%. This was a strong rebound from December, when exports fell 4.4%. Talks between the U.S. and China are continuing, and the big question is will President Trump suspend the March 1 deadline to impose new tariffs on China. The U.S. has threatened to raise tariffs on some $200 billion of Chinese goods from 10% to 25%, but Trump has said he could let the deadline pass if there is progress in the talks. Risk appetite has improved this week, but the Canadian dollar has failed to make any headway against the greenback.

Taking a page out of the Federal Reserve’s playbook, the Bank of Canada has become more dovish, after raising rates three times in 2018. The BoC is expected to stay on the sidelines at its next policy meeting in March 6. The Canadian economy is being hampered by the global trade war, which has reduced the demand for Canadian exports. Weak oil prices have also weighed on the economy and kept inflation at low levels. The Canadian dollar is under pressure, and has lost close to 1.0% in February.

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USD/CAD Fundamentals

• 8:30 Canadian Manufacturing Sales. Estimate 0.3%. Actual -1.3%

• 8:30 US Core Retail Sales. Estimate 0.0%. Actual -1.8%

• 8:30 US Retail Sales. Estimate 0.1%. Actual -1.2%

• 8:30 US PPI. Estimate 0.1%. Actual -0.1%

• 8:30 US Core PPI. Estimate 0.2%. Actual 0.3%

• 8:30 US Unemployment Claims. Estimate 225K. Actual 239K

• 10:00 US Business Inventories. Estimate 0.3%

• Tentative – US Mortgage Delinquencies

• 10:30 US Natural Gas Storage. Estimate -79B

• 8:30 Canadian Foreign Securities Purchases. Estimate 7.6B

• 8:30 US Empire State Manufacturing Index. Estimate 7.1

• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 93.3

Open: 1.3255 High: 1.3274 Low: 1.3229 Close: 1.3278

USD/CAD Technical

USD/CAD ticked higher in the Asian session but then retracted. The pair has edged higher in European trade

• 1.3200 is providing support

• 1.3290 is the next resistance line

• Current range: 1.3200 to 1.3290

Further levels in both directions:

• Below: 1.3200, 1.3125 and 1.3049

• Above: 1.3290, 1.3383, 1.3445 and 1.3547