USD/CAD Continues Sideways Chop As DXY Retraces

Summary:
• Our USD/CAD forecast is still bullish for this year. However, USDCAD can remain volatile in this month due to CPI release and FOMC meeting.

USD/CAD (USDCAD) is one of the pairs that have performed quite well in 2023. Although the pair has been trading sideways for the past few weeks, it is still maintaining its uptrend. The Canadian dollar to US dollar exchange rate depends on a lot of technical and fundamental factors.

Our analysis shows that there is still one key level that the USDCAD pair needs to reclaim before a bigger move. The price will remain volatile this week as Fed Chari Jerome Powell will be appearing in Congress for his testimony. The volatility may increase further as the month progresses.

USDCAD To Remain Volatile In March

On Monday, USD/CAD is showing minor losses and is trading at 1.358. This marks the start of the second consecutive red day for the pair, which has shown good strength this year. Nevertheless, the price is still trading 2.5% above the February lows amid a strong rebound in the DXY index. Most forex pairs have slid with respect to the dollar due to a surging dollar index.

I expect the USDCAD pair to keep trading sideways with massive volatility spikes in this month. This is because March 2023 is filled with critical events which will shape the macroeconomic landscape of this year. In the near term, this week’s congressional testimony of Powell will affect the pair. A few hawkish comments from the Fed can send the pair soaring.

However, the major event of this month will be the CPI release on 14th March and FOMC meeting on 22nd March. Analysts are expecting up to 50 basis points hike from this month’s FOMC meeting. An outcome of 25 basis points can give relief to major currencies in terms of their dollar value.

USD/CAD Price Analysis – 1D Chart

On the daily timeframe, the Canadian dollar has been weakening with respect to dollar since the start of February. The pair started the year with a negative price action as traders expected a dovish 1st quarter from the Fed. However, the back-to-back unsatisfactory PCE and CPI data have turned the Federal Reserve much hackish.

The following chart reveals that the USD/CAD forecast is bullish due to a breakout of the descending wedge. This breakout can prove to be very bullish if the price reclaims the 1.37 level. Considering many significant events lined up in this month, USD/CAD can easily flip this level. However, a significant decrease in CPI inflation on 14th March can affect the price quite negatively.