Introduction to the Canadian Dollar’s Performance
The Canadian Dollar (CAD) started the new year on a weak note, losing ground against most of its major currency peers on the first trading day of 2026. This decline is attributed to the release of the Canadian S&P Global Manufacturing Purchasing Managers Index (PMI) figures, which showed a steady decline in overall activity and output for the eleventh consecutive month. The key factor contributing to this weakness is the ongoing impact of tariffs on Canadian businesses, leading to subdued purchasing activity and increased input costs.
Daily Market Digest and Key Movers
The Canadian Dollar eased slightly against the US Dollar (USD) on Friday, losing over one-tenth of one percent. The latest Canadian S&P Global Manufacturing PMI data revealed that the manufacturing sector ended the year on a weak note, characterized by falling output and orders, persistent tariff uncertainty, and rising input costs. Similarly, the US Manufacturing PMI component showed that tariff impacts continue to affect both sides of the border, with US manufacturers boosting production in December but facing challenges due to orders falling at the widest gap since the financial crisis.
Key Takeaways from the PMI Data
The PMI data highlights the challenges faced by Canadian businesses, including tariff uncertainty, supply chain delays, and increased input costs. The US Manufacturing PMI also reflects the impact of tariffs on businesses, with production levels looking unsustainable heading into early 2026. The first significant data release that will impact the USD/CAD trading year will be the dual labor reports from the US and Canada, scheduled for release on January 9.
Canadian Dollar Price Forecast
In the 5-minute chart, USD/CAD trades at 1.3740, above the day’s opening price by around 20 pips and up for the day. The 200-period EMA edges higher at 1.3725, with price holding above it and keeping the intraday bullish tone. The Relative Strength Index (RSI) at 59.77 and the Stochastic at 68.61 indicate improving short-term momentum, leaving room for further gains before reaching overbought levels.
Technical Analysis and Market Outlook
In the daily chart, USD/CAD trades at 1.3741, remaining below the falling 50-day EMA at 1.3849 and the 200-day EMA at 1.3891, maintaining a bearish tone. The short-term average below the long-term one reinforces downside pressure, while the RSI at 40.9 and the Stochastic at 42.7 suggest scope for a corrective move. A recovery could stall at the 50-day EMA, and sustained weakness beneath the current level would leave risk of fresh lows.
Conclusion and Future Outlook
The Canadian Dollar’s performance is expected to remain influenced by the ongoing impact of tariffs, supply chain delays, and input costs. As the market navigates the new year, key data releases such as the labor reports from the US and Canada will provide crucial insights into the direction of the USD/CAD pair. For more information and the latest updates, visit Here
Smart Tip for Readers
When analyzing currency performance, consider the impact of tariffs and trade policies on businesses and economies, as these factors can significantly influence market trends and currency values. Staying informed about key data releases and market developments can help you make more informed decisions and navigate the complex world of foreign exchange.
