Canada-U.S. trade tensions ease.

Canada's manufacturing PMI declined to 51.6 in January from 52.2 in December, indicating a slowdown in expansion. Additionally, production capacity and new orders grew at a slower pace. However, export sales increased for the first time since 2023, as some U.S. customers placed advance orders before tariffs under President Trump took effect. Nevertheless, overall market uncertainty regarding tariff rates and potential global trade wars has left manufacturers concerned. On the cost side, raw material prices surged to a 21-month high due to a stronger U.S. dollar, which drove up import costs. Furthermore, production expenses also increased.

Canada's services PMI edged up slightly to 49.0 in January from 48.2 in December 2024, marking a second consecutive contraction in service sector activity. This decline was driven by a decrease in new businesses and weakened market demand, as customers remained concerned about budget uncertainties and economic instability. As a result, export business continued to decline, marking the sharpest drop in four years. Additionally, companies reduced their workforce for the first time in four months to better manage labor costs, while rising expenses were primarily due to persistently high raw material costs. Confidence in the service sector remained below long-term trends, with business operators hoping that the Bank of Canada would lower interest rates to stimulate demand and support economic growth.

Canada recorded a trade surplus of CAD 0.7 billion in December, marking a return to surplus after a deficit in the previous month. Exports rose significantly more than imports. Canadian imports increased by 2.3% to CAD 68.8 billion, following a 2.8% increase in the previous month. The majority of imports were consumer goods (up 4.7%), non-metallic mineral products (up 8.7%), machinery, and automotive parts. Imports from the U.S., which account for over 60% of Canada’s total imports, declined by 1.5% in December, while imports from countries outside the U.S. rose by 9% in 2024.

On the export side, Canadian exports increased by 4.9% to CAD 69.5 billion, reaching the highest level in 10 months and marking a new peak since 2022. This surge was primarily driven by the depreciation of the Canadian dollar, which boosted overall profits in 8 out of 11 industrial sectors. Notable gains were seen in non-metallic mineral products (up 9.2% to CAD 10 billion), energy products (mainly crude oil), and automobiles and related equipment. The United States remained Canada’s largest trading partner, with exports to the U.S. rising by more than 5%, reflecting concerns over impending tariffs under the Trump administration.

The yield on Canada’s 10-year government bond remained steady at around 3.03% after Prime Minister Trudeau confirmed that the U.S. would suspend tariffs on Canadian imports for at least 30 days. This postponement helped ease concerns about potential trade disruptions and the impact on Canadian exports. Moreover, the Bank of Canada adopted a more dovish stance, having recently cut interest rates by 25 basis points to 3%.

Techical analysis data (5H)

Resistance: 1.4372, 1.4383, 1.4399

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.4329 - 1.4345 but cannot break the support at 1.4345, you may set a TP at approximately 1.4383 and SL at around 1.4318 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.4372 - 1.4383, you may set a TP at approximately 1.4399 and SL at around 1.4329 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.4372 - 1.4383 but cannot break the resistance at 1.4372, you may set a TP at approximately 1.4329 and SL at around 1.4399 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.4329 - 1.4345, you may set a TP at approximately 1.4318 and SL at around 1.4383 or according to your acceptable risk.

Pivot point February 6, 2025 07:01 PM. GMT+7