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USDCAD Upward Dynamics — in the Future

3/7/2023 1:37 PM

Last week, the USD/CAD pair made attempts to grow, but failed to consolidate above the 1.3610 mark (Murray level [7/8]). Nevertheless, the prerequisites for a further increase in quotations remain and they are primarily related to monetary factors. A slight slowdown in inflation and a strong US labor market have convinced experts that US Fed officials will continue tightening monetary policy in the near future, although the specific step of raising the interest rate and its peak value remain uncertain.

Today and on Wednesday, the chairman of the US regulator Jerome Powell will make a report to the US Congress, where he will have to clarify the officials' vision of the current economic situation, as well as highlight the further actions of his department. Most investors are now focused on whether the slow decline in the inflation rate is the result of random factors or insufficient actions by the US Fed. If officials come to the second conclusion, the interest rate may be raised even more rapidly, which will strengthen the position of the US currency against competitors. Jerome Powell's speech and the publication of February employment data in the USA will be factors that can influence the movement of the USD/CAD pair, and so far its growth looks more preferable.

In turn, the Canadian dollar is under pressure amid the release of the latest weak statistical data. The February Ivey business activity index fell from 60.1 points to 51.6 points and was close to the stagnation zone, which confirms the continuation of a serious slowdown in the growth of the national economy. In addition, the likely further increase in the cost of borrowing in the USA may put additional pressure on the American economy, which may result in a reduction in trade turnover between the USA and Canada, which will also negatively affect the positions of the Canadian dollar.

The price is around 1.3610 (Murray level [7/8]) and may continue to rise to 1.3672 (Murray level [8/8]), 1.3733 (Murray level [+1/8]) and 1.3794 (Murray level [+2/8]). The key for the "bears" is the 1.3550 mark (Fibonacci retracement 23.6%, Murray level is [6/8]). If it is broken down, the decline will be able to continue to the levels of 1.3488 (Murray level [5/8]) and 1.3427 (Murray level [4/8]).

In general, the upward trend in the market remains, as evidenced by the upward reversal of the Bollinger Bands and the stabilization of the MACD in the positive zone. A downward reversal of the Stochastic allows for a decline, but its potential is seen to be limited.

Resistance levels: 1.3610, 1.3672, 1.3733, 1.3794. | Support levels: 1.3550, 1.3488, 1.3427.

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