The USD/CAD exchange rate will be in focus next week as the Bank of Canada (BoC) delivers its second interest rate decision of the year and the US publishes its non-farm payrolls (NFP) data. The pair was trading at 1.3560, a few points below the year-to-date high of 1.3605.
BoC decision and NFP dataThe biggest USD/CAD news next week will be the upcoming interest rate decision by the Bank of Canada set for Wednesday.
Economists polled by Reuters believe that the bank will decide to leave interest rates unchanged at 5.0%. The BoC will likely signal that it will start cutting interest rates in the coming months.
This decision comes at a time when the Canadian economy is not doing well even as it avoided a recession in the last quarter. Data published this week showed that the economy expanded by 1% in Q4 and by 0.2% on a QoQ basis.
The most recent data showed that inflation is falling. The headline Consumer Price Index (CPI) cooled to 2.9% in January. It remains a few points above the BoC’s target of 2.0%.
Therefore, the combination of falling inflation and slowing inflation will likely put pressure on the BoC to cut rates earlier than expected.
The other important USD/CAD news will be the latest US and Canadian jobs numbers scheduled for Friday.
These numbers will provide more colour about the state of the two economies. In the US, economists expect the data to show that the economy created over 188k jobs in February as the unemployment rate remained at 3.7%.
The average hourly earnings are set to remain at 4.5%. If these estimates are accurate, it means that the Fed will likely deliver fewer rate cuts than expected. Most analysts expect it to deliver three cuts this year.
USD/CAD technical analysis
The daily chart shows that the USD/CAD exchange rate has drifted upwards in the past few days and is now hovering near its highest point this year. It has remained above the 50-day and 25-day Exponential Moving Averages (EMA).
However, a keener look shows that the pair has formed a rising wedge pattern, which is shown in black. This pattern is one of the most bearish signs in the market.
The MACD indicator has remained slightly above the neutral point. Therefore, the pair will likely have a bearish breakout after the BoC interest rate decision. If this happens, the next point to watch will be at 1.3400.
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