- The Canadian dollar froze, slowing the recovery at the start of the week.
- Canada’s Ivey PMI fell in December, below expectations.
- Canadian employment figures due this week are expected to be overshadowed by the imminent US NFP release.
The Canadian dollar (CAD) held back a recent bullish rally, stalling on the charts and trading at familiar levels against the US dollar. The loonie has recovered some ground after falling to multi-year highs in late 2024, but upward momentum remains elusive.
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Canada’s Ivey Purchasing Managers’ Index (PMI) figures disappointed Canadian traders looking for a reason to buy. Economic activity survey results continue to fall short of expectations, and the low-impact rise in trade figures in November was too small to produce a rise in market flows.
The Canadian dollar hesitates as markets wait for new signs
- Canadian exports and imports both increased last November, but the data was too old and low-impact to significantly drive the Canadian dollar’s movements.
- Canada’s Ivey PMI for December fell to a 12-month low of 44.3 from 49.7 in November, as expectations for economic activity contract sharply.
- Despite the headline crisis, the seasonally adjusted Ivey PMI rose to 54.7 from 52.3, but still fell short of the forecast of 55.4, a decidedly high expectation.
- Results from the U.S. Economic Activity Survey took center stage on Tuesday, with the ISM Services PMI for December jumping to 54.1 from 53.3 expected and 52.1 previously. Increased business activity and production costs in the United States are reigniting fears that the Federal Reserve (Fed) will not cut rates in 2025, dampening risk appetite.
- Friday’s Nonfarm Payrolls (NFP) release will spark renewed interest as investors look for reasons to continue to hold out hope for further rate cuts.
Canadian Dollar Price Analysis
The USD/CAD pair reached multi-year highs in December, trading north of the 1.4400 threshold before price action settled into a sharp sideways swing, keeping bids just below the price level key. The USD/CAD market has finally plugged the slow hemorrhage that has sent the Canadian dollar to its lowest prices against the US dollar since the pandemic, but a firm bullish recovery remains elusive.
1.4300 is firming as an immediate technical floor. Even if Canadian dollar flows are able to generate enough momentum to break through the key level, the 50-day exponential moving average (EMA) will be the next immediate risk by reaching 1.4200.
Daily USD/CAD chart
By Joshua Gibson, FXStreet
Joshua joins the FXStreet team as an Economics and Finance double major from the University of Vancouver with twelve years of experience as an independent trader focused on technical analysis.
Disclaimer: The information and opinions contained in this report are provided for general information purposes and do not constitute an offer or solicitation with respect to the purchase or sale of forex contracts or CFDs. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, and assumes no liability for any direct, indirect or consequential harm which may result from the fact that anyone relies on such information.
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