USD/CAD analysis: Currency Pair of the Week – March 4, 2024

• USD/CAD analysis: US dollar steady after Friday’s drop
• BOC, Powell and NFP among macro highlights this week
• USD/CAD technical analysis point to breakout

The USD/CAD faces a busy week, with lots of market-moving data from both sides of the border due for release throughout the week, culminating in the simultaneous publication of the February jobs report on Friday. We also have a rate decision from the Bank of Canada to look forward to in midweek.

USD/CAD analysis: US dollar steady after Friday’s drop

The US dollar has started the new week flattish, ahead of major events happening later in the week. Federal Reserve chair Jerome Powell will be testifying before Congress while in terms of data, the US non-farm payroll report on Friday will be the key focus. The greenback fell on Friday on the back of softer-than-expected manufacturing ISM data. However, the losses were limited amid growing bets the US would avoid a recession, and Federal Reserve officials insist that there is no rush to start cutting interest rates. Let’s see if this week’s upcoming data will change that view.

USD/CAD analysis: key data to watch this week

Here are the key data highlights to watch this week, relevant for the USD/CAD currency pair:

Among the macro highlights this week is the Bank of Canada’s rate decision. The North American central bank is expected to keep rates unchanged at 5%, with expectations very low that Governor Macklem will make any immediate tweaks to monetary policy. Instead, expect the BOC to offer insights into its economic outlook and future expectations.

Meanwhile, the highly anticipated US jobs report is likely to reignite volatility. Forecasts suggest a significant slowdown in job growth following last month's addition of over 350,000 jobs and a 0.6% month-on-month rise in average hourly earnings. A robust report could diminish the likelihood of a Federal Reserve rate cut in the first half of the year.

USD/CAD analysis: Technical levels and factors to watch

Source: TradingView.com

The USD/CAD has edged higher in the first months of the year, regaining December’s entire losses. Therefore, the momentum is with the bulls, albeit it has been a slow grind – and not just for the USD/CAD pair.

The USD/CAD has been printing higher highs and higher lows ever since it bottomed at 13177 in December. In the process, several resistance levels have broken down including the 200-day average at 1.3480 and the psychologically important 1.3500 handle. These levels are now among the support levels that the bulls will need to defend if they want to maintain the bullish trend.

More recently, the USD/CAD has started to chip away at resistance around the 1.3530-1.3550 area, which suggests that rates are gearing up for a potential breakout above the December high of 1.3620.

The line in the sand now is at 1.3440ish, which was the last low prior to the latest rally. A potential move below that level would invalidate the bullish trend for the USD/CAD.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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