USDCAD Analysis
| Performance after Thursday | |||||
| Period | Pct | Chg | Momentum | ||
| Thursday | -0.12% | -17.3 Pips |  |
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| Week to-date | -2.81% | -413.1 Pips | |
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| February | -1.3% | -189.1 Pips |  |
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Upcoming key events (London Time)
Fri 01:30 PM CAD Labour Force Net Change in Employment
Fri 01:30 PM USD Nonfarm Payroll Employment
What happened lately
In Canada, the Ivey Purchasing Managers Index (PMI), which is a key indicator of the economic health of the manufacturing sector, fell to 47.1 in January, a significant decrease from the 54.7 recorded in December, after seasonal adjustment. This decline suggests that Canadian manufacturers are experiencing a contraction in activity, as any reading below 50 typically indicates a reduction in business conditions. It reflects decreased demand or production capacity utilization, potentially pointing to economic headwinds affecting the sector in early 2023.
In the United States, the Bureau of Labor Statistics reported a rise in Unit Labor Costs for Q4, with a flash estimate increase to 3% from 0.8% in Q3. This rise suggests employers are paying more for labor output, potentially signalling wage inflation pressures. Concurrently, the Department of Labor highlighted an increase in Initial Unemployment Insurance Claims, reaching 219,000 for the week ending February 1, up from the previous 207,000. This suggests a slight softening in the labor market. Meanwhile, the nonfarm business sector saw labor productivity decrease to a 1.2% rate in Q4, down from the previous quarter’s growth of 2.2%, indicating a slow down in output per labor hour, which could imply inefficiencies or reduced economic output potential.
Considering the implications for the USDCAD currency pair, the recent economic indicators suggest varied impact. The weakening PMI in Canada could weigh negatively on the Canadian dollar (CAD), suggesting less future demand for domestic goods. Meanwhile, mixed labor market signals and increased labor costs in the US could indicate inflation pressures, prompting potential monetary policy scrutiny. With USDCAD experiencing a minor drop of -0.12% to 1.43039 recently, further adjustments may occur as upcoming events unfold, such as the Canadian Labour Force data and the US Nonfarm Payroll Employment figures. These releases could introduce further volatility in the currency pair, as traders weigh economic momentum shifts in both economies. A stronger-than-expected US labor report could buoy the USD, potentially increasing USDCAD, whereas solid Canadian labor figures could provide support for the CAD, potentially tempering upward pressure on USDCAD.
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What can we expect from USDCAD today?
USDCAD on Thursday dropped -0.12% to 1.43039. Price is below 9-Day EMA while Stochastic is falling.
Updated daily direction for USDCAD looks bearish as the pair posted lower in Thursday trading session.
Looking ahead for the day, immediate support level is at S1 1.42784 with break below could see further selling pressure towards S2 at 1.4253. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.43665 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.42970 would indicate selling pressure.
For the week to-date, take note that USDCAD is bearish as the pair posted lower by -2.81%.
Key levels to watch out:
| R3 | 1.44174 |
| R2 | 1.4392 |
| R1 | 1.43479 |
| Daily Pivot | 1.43225 |
| S1 | 1.42784 |
| S2 | 1.4253 |
| S3 | 1.42089 |
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