- Risk sentiment improved after China’s manufacturing activity increased.
- The Canadian economy unexpectedly slowed in the last three months of 2022.
- Investors still expect the BOC to maintain its benchmark rate of 4.50%.
Today’s USD/CAD forecast is slightly bearish. USD/CAD dropped on Wednesday after the previous bullish session as traders dumped the safe-haven dollar. Risk sentiment improved after China’s manufacturing activity increased at its quickest rate since April 2012 and beat estimates.
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According to data released on Tuesday, the Canadian economy unexpectedly slowed in the last three months of 2022 but likely recovered in January. This outcome supports the Bank of Canada’s decision to leave interest rates on hold at its upcoming policy meeting in March.
According to Statistics Canada, after five consecutive quarters of growth, the annualized fourth-quarter gross domestic product was unchanged from the third-quarter GDP.
The outcome was also less than the Bank of Canada’s 1.3% annualized GDP growth prediction for the fourth quarter. To control the excessive inflation, the central bank has increased its benchmark interest rate at a record rate, but last month it announced it wants to pause its tightening campaign.
The number of jobs added in Canada in January was ten times higher than anticipated, and the same month saw an increase in manufacturing and retail sales. According to Statscan, the economy probably recovered in January and expanded by 0.3%.
At the policy meeting on March 8, the money markets are still expecting the central bank to maintain its benchmark rate at 4.50%, and they have reduced their bets that it would be obliged to tighten again later in the year.
USD/CAD key events today
The US ISM Manufacturing Purchasing Managers Index will be released later. Investors expect to see an increase from the previous 47.4 to 48.0.
USD/CAD technical forecast: Strong resistance at the 1.3650 key level
The 4-hour chart shows USD/CAD pulling back after failing to go above the 1.3650 resistance level. The bullish trend remains intact as the price trades above the 30-SMA and the RSI above 50. Bulls have been in control for a long time and have respected the 30-SMA as support.
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At the same time, the RSI has stayed above the 50-level, supporting bullish momentum. Therefore, the price will likely find support at the SMA and push back to retest the 1.3650 resistance.
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