USD/CAD forecast: brief pullback expected but still in control

on Mar 10, 2023
  • The USD/CAD price continued to rally after the BoC decision.
  • The US and Canada will publish the latest jobs numbers on Friday.
  • I expect a brief pullback after the jobs report.

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The USD/CAD exchange rate has risen in the past seven straight days and is hovering at its highest level since October 21st. It has jumped by more than 4.24% from its lowest level this year as the US dollar index (DXY) jumped.

Non-Farm Payrolls ahead

The biggest forex news of the day will be the upcoming US non-farm payrolls (NFP) data. These numbers will have an immediate impact on the US dollar and other financial assets, thanks to the current state of the market.

These numbers, coupled with next week’s inflation data, will have an impact on how the next actions by the Federal Reserve. In his testimony to Congress this week, Jerome Powell, the Federal Reserve Chair, warned that the bank will need to deliver more hikes in the coming meetings.

On Wednesday, he tried to walk back the statement and reiterated that the bank will continue focusing on data. And jobs and inflation are the two important numbers that the Fed focuses on. Therefore, economists will focus on these numbers as they predict what will happen in this meeting.

Economists expect that the economy added more than 217k jobs in February while the unemployment rate remained unchanged at 3.4%. If the numbers are much better than expected, we could see the bank hike interest rates in the coming months. Analysts expect that the bank will hike by 0.50% this month.

The USD/CAD pair will also react mildly to the latest Canada jobs numbers. Economists believe that unemployment remained at 5.1% in February while the economy added more than 10k jobs. These numbers will have a minimal impact on the Canadian dollar. That’s because the Bank of Canada decided to leave interest rates unchanged at 4.5% this week.

USD/CAD forecast

USD/CAD chart by TradingView

The daily chart shows that the USD/CAD price has been in a strong bullish trend in the past few days. It has made a major milestone of moving above the key resistance level at 1.3700, the highest level on December 20th. This price action was in line with my last prediction. The stock has moved above the 25-day and 50-day moving averages. It is also above the ascending trendline shown in green.

Therefore, there is a likelihood that the pair will retest the key support at 1.3700 and then resume the bullish trend. In all, the shares will likely retest last year’s high of 1.3977.