USD/CAD Fundamental View
Friday’s Canadian January employment report on Monday was better than market expectation. Reports came 34.5k where the market forecast was only 16.3k. Employment reports print more than twice and the unemployment rate dropped 5.5% from 5.6%. And hourly wages rose 4.43% from 3.84%. It’s a solid Canadian labor market report. Even last week’s IVEY PMI report came 57.3 from 51.9 where the market expected only 53.3. There is nothing negative about Canadian economic reports.
On the other hand, US ADP, NFP, and ISM-Non Manufacturing Reports beat the market expectation. But Earnings Dropped than expectation. And Unemployment rose to 3.6% from 3.5%. Service PMI dropped to 53.1 from 54.8. Overall US labor market report is mixed. But CAD seems weak than USD. Even though last month’s Canadian GDP meet the market expectation.
It’s all about coronavirus concerned. Statistically Chinese coronavirus likely has an impact on both the economy and overall around the world. USD is the most lucrative safe haven so it is getting more benefit. One more thing playing behind CAD’s weakness is the Oil price. Oil is mostly suffered by Chinese coronavirus. China is one of the biggest oil exporter countries. But many Chinese companies shut down or closed their business because of coronavirus. If oil prices dropped generally CAD becomes weak. And that is happening in the forex market.
Next week there is no Canadian market mover data. But the US has several market mover data. FOMC, CPI, and retail sales. Last FOMC was dovish. As FED is not willing to hike interest rate so it is hard to believe FOMC will be hawkish though NFP was positive and earnings came negative and unemployment rose. SO labor market is neutral and may have a negative impact on CPI. Many US companies also shut down in China. This is also a negative sign of core retail sales. In my view, economic reports are not a major factor right now. The improvement or worsening condition of coronavirus will play a major role in the next week as well as.
USD/CAD Technical Analysis
From the present market rate, USD/CAD weekly chart shows 1.3340 is the critical resistance. It is very hard to break out this level unless the oil price stable below 50 Dollar/Barrel. Incase 1.3350 breaks above and stable next target are 1.3420 and finally 1.3500 area.
On the other hand, If china announces something positive about coronavirus or US CPI and retail sales drop we may see a major correction. Our first target would be 1.3220 and the next target 1.3045 AREA.