The Canadian dollar is slightly higher on the first trading day of the year. Currently, USD/CAD is trading at 1.2748, up 0.11% on the day.
Canada Manufacturing PMI climbs
The week has started off on a positive note, as Manufacturing PMI rose to 57.9 in December, up from 55.8 beforehand. This marked a record high for the index. The PMI remained in expansionary territory since July, as manufacturing has benefited from stronger demand for Canadian goods from the US and Asia.
Canada’s GDP continues to move upwards, but despite this trend, the Bank of Canada has forecast that the economy will contract by 5.7% this year and inflation will be 0.6%, well below the central bank’s target of 2 percent. The bank expects things to brighten in 2021, with GDP expected to grow by 4.2% and inflation to hit 1.0% percent.
The US dollar is saying goodbye to a miserable year, but it’s far from clear that the greenback will rebound anytime soon. Pro-cyclical currencies have looked especially sharp against the US currency, and the Canadian dollar has racked up gains of 4 percent against its struggling counterpart since November 1.
All eyes will be on the state of Georgia on Tuesday, as the state holds a runoff election for two seats in the US Senate. If the Republicans can win one of these seats, they will retain control of the Senate, which would allow them to block Democratic plans for massive stimulus and raising taxes. Conversely, if the Democrats manage to win both seats, they would have full control of the federal government, which would make it much easier for them to implement their agenda. The US dollar is projected to fall if the Republicans maintain the Senate and to gain ground if the Democrats win both seats.
- USD/CAD is facing resistance at 1.2833. This is followed by resistance at 1.2937
- The first line of support is at 1.2669. Below, there is support at 1.2609
- The pair broke below the 20-day MA line last week and remains below this line