The Canadian dollar posted sharp losses at the end of the week and USD/CAD rose close to 1 percent on the week. There are four events in the upcoming week, including GDP. Here is an outlook for the highlights and an updated technical analysis for USD/CAD.  

Canada’s data calendar was light last week. Corporate Profits posted a second straight gain, at 7.9%. On the inflation front, the Raw Materials Price Index rose 5.7%, above expectations and its highest gain since January.

In the US, Fed Chair Powell had a dovish message for the markets in his testimony before Congress.  Second-estimate GDP for Q4 came in at 4.1%, revised upwards from 4.1%. There was positive news from Durable Goods reports, with strong acceleration in January. The headline read jumped 3.4% while Core Durable Goods rose 1.4%.

USD/CAD daily graph with resistance and support lines on it (FXC,UDN). 

1. Manufacturing PMI: Monday, 14:30. Manufacturing remains in expansionary territory, with readings above the neutral 50-level. The PMI slowed to 54.4 in January, down from 57.9. We now await the February data.
2. GDP: Tuesday, 14:30. Canada releases its GDP on a monthly basis. In November, GDP rose to 0.7%, up from 0.4% beforehand. However, GDP is expected to slow to 0.1% in December.
3. Building Permits: Wednesday, 13:30. Building Permits has been showing significant swings. In December, the indicator came in at -4.1% and the January forecast stands at 1.0%.
4. Ivey PMI: Friday, 15:00. The PMI has been contracting for two successive months, with readings below the 50-level. Another contraction is projected for February, with an estimate of 49.2.

Technical lines from top to bottom:

We start at 1.3041, an important monthly resistance line.

1.2911 was last tested in resistance in mid-December.

1.2804 is next.

1.2710 is an immediate support level.

1.2620 is protecting the round number of 1.2600.

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

1.2329 is the final support level for now..

I am neutral on USD/CAD

The US dollar showed some broad strength last week and US numbers are pointing to a strengthening economy. However, it’s questionable if this momentum will continue, as the Biden stimulus passage was passed in the House and now makes its way to the Senate.  Once the deal is approved, the US dollar could be under some downward pressure.