The Canadian Dollar (CAD) fell slightly on Friday, starting the first trading day of 2026 lower. The Canadian dollar is one of the worst performing currencies on the day, losing weight against all but one of the major currencies. Despite the continued note of general weakness to open the new trading year, the Canadian dollar remains within near-term ranges as overall market momentum remains tepid post-holiday.
Canada’s global Manufacturing Purchasing Managers’ Index (S&P) numbers showed more of the same in December, with overall activity and production falling for the 11th straight month. Tariffs remain a major thorn in Canadian business activity, as companies opt for lean operations and inventory management, keeping purchasing activity weak. Tariffs remain the main irony for Canadian businesses, with concerns keeping supply lines strained and creating some inflationary pressures on input costs.
Daily summary of market drivers: The Canadian dollar fell slightly after confirmation of the usual Purchasing Managers’ Indices (PMIs).
The Canadian dollar lost just over a tenth of one percent against the US dollar (USD) on Friday.
- The new trading year has now arrived, but overall market narratives remain largely the same.
- According to the latest S&P Canadian Global Manufacturing PMI, Canada’s manufacturing sector finished the year weakly, with lower production and orders, continued tariff uncertainty weighing on confidence, companies cutting employment, inventories and purchases, and higher input costs due to ongoing supply chain delays and tariffs.
- The US manufacturing PMI component was also released on Friday, showing that the effects of tariffs continue to impact both sides of the 49th parallel.
- US manufacturers boosted production in December, supporting growth into late 2025. However, with orders falling at their widest gap since the financial crisis, cost pressures from tariffs squeezing demand, and rising payroll risks, current production levels look unsustainable heading into early 2026 despite some decline in input inflation.
- The first meaningful data dump that will start the USD/CAD trading year in earnest will be next week’s double employment reports, with both the US and Canada scheduled to release their latest employment statistics on December 9th.
Canadian dollar price forecast
On the 5-minute chart, USD/CAD is trading at 1.3740, about 20 pips above today’s opening price and up on the day. The 200 period moving average is rising at 1.3725, with the price holding above it and maintaining the bullish tone during the day. Pullbacks are supported while prices remain above this average. The RSI at 59.77 (neutral-bullish) is rising, in line with improving short-term momentum. Stochastic near 68.61 continues to advance, leaving room before it becomes overbought.
Momentum remains supportive as buyers defend the rising average. A pullback below the 200-day moving average would undermine the upward move and could lead to a deeper pullback. With the RSI near the 70 threshold and the Stochastic not in the 80 range yet, the bulls could try to extend their gains, although the uptrend will slow if the momentum stalls.
On the daily chart, the USD/CAD pair is trading at 1.3741. The pair remains below the 50-day EMA at 1.3849 and the 200-day EMA at 1.3891, maintaining its bearish tone. The short-term average below the long-term average reinforces downward pressure. The RSI at 40.9 (neutral) has rebounded from oversold territory but remains below the 50 midline.
Stochastic at 42.7 has turned higher, supporting scope for corrective movement. The recovery could stop at the 50-day moving average at 1.3849, while continued weakness below the current level would leave the risk of new lows being reached. A decisive push through the short-term average would open the way to the longer-term average; Otherwise, sellers remain in control.
(Technical analysis of this story was written with the help of an artificial intelligence tool)
