By Ketki Saxena
Investing.com – The Canadian dollar posted a modest loss against its US counterpart today, as risk-sentiment and crude prices remained mixed ahead of testimony by Federal Reserve Chair Jerome Powell expected tomorrow.
The Canadian dollar continues to remain on the backfoot ahead of a monetary policy meeting by the Bank of Canada this week (Wednesday March 8), at which the Canadian central bank is expected to maintain its benchmark rate at 4.5%.
In comparison, money markets are pricing in a Fed Funds terminal rate of 5.4%, with the divergence of monetary policy between the two central banks continues to serve as a tailwind to the loonie.
Analysts at National Bank of Canada (TSX:NA) note, “While job creation remains strong, a lacklustre GDP report and slower than expected inflation point to a divergence in monetary policy between Canada and the US. While our new spread forecast is not good news for the Canadian dollar in the near term, we still believe that the reopening of the Chinese economy, coupled with the disruption of commodity supplies due to the war in Ukraine, will help limit the depreciation of the CAD.”
National Bank also revised its forecast for the Canadian dollar, noting “Under our new US scenario for growth and interest rates, we see USD/CAD lingering in the 1.36-1.39 range through the first half of 2023, before making comeback in the second half of the year when the Fed finally ends its tightening campaign. Our new year-end target is 1.32 (1.27 previously).”
On a technical level for the pair, analysts at Scotiabank (TSX:BNS) note,“Technical pointers suggest the USD will remain well-supported and that minor dips remain a buy from a chart perspective.”
“Bull trend dynamics are evident across the short, medium and longer-term charts.”
“Support is 1.3535/55 (I would expect that to hold early this week, at least).” while “Resistance is 1.3665, ahead of 1.3700/10 and 1.3830.”