USD/CAD Forecast March 9-13 – BoC Slashes Rates as Coronavirus Jitters Worsen

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USD/CAD was almost unchanged last week. There are three events in the upcoming week, including the annual budget. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.
The Bank of Canada followed the Federal Reserve’s lead and cut rates by 0.50%, lowering rates to 1.25%. The rate move had been widely expected, so the Canadian dollar steadied after some initial movement after the announcement. Even with the sharp cut, the BoC rate statement was dovish. Policymakers stated that “the outlook is clearly weaker now than it was in January. As the situation evolves, Governing Council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target.” There was some good news on the employment front, as the economy created 30.3 thousand jobs in February, marking a third straight month with gains above the 30-K level.
Over in the U.S., the highlight of the week was the dramatic rate cut the Federal Reserve. The Fed slashed rates by 0.50%, which was the first cut between meetings since 2008. At a press conference, Fed Chair Powell acknowledged the severity of the coronavirus threat and added that he expected the rate cut to boost the U.S. economy. The week wrapped up with sharp employment data. Nonfarm payrolls sparkled, climbing to 275 thousand in February, up from 225 thousand. This crushed the estimate of 175 thousand. Wage growth improved from 0.2% to 0.3%, while the unemployment rate dropped from 3.6% to 3.5%.

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:

  1. Housing Starts: Monday, 12:15. Housing Starts jumped to 213 thousand in January, up from 197 thousand. This marked a 4-month high. The upward trend is expected to continue in February, with an estimate of 217 thousand.
  2. Building Permits: Monday, 12:30. This indicator rebounded in December with a strong gain of 7.4%, above the estimate of 3.5%. This ended a nasty streak of three consecutive declines. We now await the January data.
  3. Annual Budget Release: Wednesday, 20:00. Canada will release its annual budget, which outlines the government’s projected borrowing and spending levels and financial objectives.

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3660, which held since December 2018. 1.3550 is next.

1.3420 was tested in resistance, June 2019.

1.3330 is providing support.

1.3150 has strengthened in support.

1.3100 (mentioned last week) is the next support level.

1.3048 is protecting the symbolic 1.3000 level. It is the final support level for now.

I remain bullish on USD/CAD

Investor risk appetite remains weak as the coronavirus has now spread to Europe and the United States. This means that minor currencies like the Canadian dollar are likely to remain under pressure.

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.