USD/CAD Murrey math lines: Upbeat ahead of BoC decision

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on Mar 8, 2023
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  • The USD/CAD price jumped sharply after the hawkish Fed statement.
  • Jerome Powell pointed to more interest rate hikes this year.
  • The Bank of Canada will conclude its two-day meeting.

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The USD/CAD exchange rate jumped to a high of 1.3773, the highest point since November after the extremely hawkish statement by Jerome Powell. It has risen by more than 3.85% from its lowest level this year as focus shifts to the upcoming Bank of Canada (BoC) decision. The GBP/CAD and EUR/CAD have also rallied.

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Bank of Canada decision ahead

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The biggest forex news of the week was the start of Jerome Powell’s testimony to the Senate on Tuesday. In it, he reiterated that the Fed will be more hawkish than previously thought. He noted that the bank will likely deliver more rate hikes than expected in a bid to put inflation on check.

Therefore, analysts believe that the Fed will hike interest rates by 0.50% in March followed by two or three more 0.25% rate hikes. This will be much higher than what most analysts were expecting. In the aftermath of the statement, American bond yields jumped while stocks plunged. The Dow Jones shed more than 500 points.

The next important USD/CAD news will be the second day of Jerome Powell’s testimony. Unlike on the first day, the impact on the pair will be a bit limited. 

The Bank of Canada will also conclude its two-day meeting on Wednesday. Economists believe that the BoC will maintain a relatively dovish tone by leaving interest rates unchanged at 4.50%. The bank hinted that it will take a strategic pause this month. 

However, with the Fed maintaining a tight grip on the market, there is a likelihood that the BoC will surprise by hiking by 0.25%. In a note, an analyst at the Bank of Nova Scotia said:

“They risk watching the currency tumble. The loonie has already depreciated by enough on a real effective exchange rate basis to be of concern to import price pass-through effects and inflation expectations.” 

USD/CAD forecast

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usd/cad

USD/CAD chart by TradingView

The USD/CAD price has been in a strong bullish trend in the past few months, which makes the loonie the worst-performing G7 currency. As it rose, the pair moved above the important resistance level at 1.3710, the highest level on December 16. The Murrey Math Lines shows that the pair has moved to the first overshoot level and is nearing the extreme overshoot point.

Therefore, the USD to CAD exchange rate will continue soaring as buyers target the next resistance level at 1.3977, which is about 1.62% above the current level. It was the highest level in October last year.

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