- Powell repeated his hawkish stance but struck a cautious note.
- The Bank of Canada opted to halt its tightening campaign on Wednesday.
- In January, Canada unexpectedly recorded a trade surplus of C$1.9 billion ($1.4 billion).
Today’s USD/CAD forecast is bullish. After Federal Reserve Chair Jerome Powell’s speech, the dollar was trading close to a three-month high.
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On Wednesday’s second day of his testimony to Congress, Powell repeated his hawkish stance but noted that debate on the amount and pace of future rate hikes was still in progress and would be data-dependent.
The hawkish tone has helped the US dollar gain ground versus a basket of major currencies, including the Canadian dollar.
The Bank of Canada opted to halt its tightening campaign on Wednesday, leading to the Canadian currency falling near a five-month low against its US counterpart. This contrasts the Federal Reserve’s turn to a more hawkish approach this week.
As predicted, the Bank of Canada kept its benchmark overnight interest rate at 4.50%, making it the first major central bank to take an inactive position in the face of forecasted declines in high inflation.
Economic data revealed that Canada unexpectedly posted a trade surplus of C$1.9 billion ($1.4 billion) in January, primarily driven by increased exports across the board.
The numbers indicate a great start to the year, which could improve economic prospects at a time when it is anticipated that high interest rates will slow the domestic economy.
Oil, a major export for Canada, lost 1.2% of its value and finished the day lower at $76.66 per barrel. This also contributed to the weaker Canadian dollar.
USD/CAD key events
Investors will receive the initial jobless claims report later in the day, giving a clear picture of the US labor market.
USD/CAD technical forecast: Probable correction from overbought zone
The 4-hour chart shows USD/CAD in a steep bullish move, with the price trading far above the 30-SMA and the RSI in the overbought region. The price has risen steeply since it broke above the 1.3650 resistance.
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The price is currently overbought and trading near the 1.3801 critical psychological level. This might lead to a sideways move or a pullback from these extreme levels before the uptrend continues above 1.3801.
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