The USD/CAD pair retreats to approximately 1.3360, facing challenges in sustaining above the critical resistance level of 1.3400. The Canadian Dollar (CAD) grapples with diminished demand for safe-haven assets, a consequence of the heightened risk appetite among market participants.
A surge in S&P500 futures during the Asian session signals an increased preference for risk-sensitive assets. The US Dollar Index (DXY) corrects to around 102.20, as expectations for the first rate cut by the Federal Reserve (Fed) in March persist, following an unusually tight rate-hiking campaign. The focus now turns to the upcoming United States Consumer Price Index (CPI) data for December, scheduled for release at 13:30 GMT.
Projections suggest an annual headline inflation growth of 3.2%, a slight increase from November’s 3.1%. Simultaneously, the core CPI, excluding volatile food and oil prices, is anticipated to rise at a slower pace of 3.8%, compared to the previous 4.0%.
In the realm of oil, prices experience a modest rebound, reaching around $72.00, driven by escalating tensions in the Middle East. Attacks on commercial oil tankers in the Red Sea disrupt shipments, causing a supply shortage. Notably, Canada, a primary oil exporter to the United States, benefits from higher oil prices, supporting the Canadian Dollar.
The USD/CAD pair remains confined within the 1.3340-1.3400 range on an hourly scale, struggling for direction as investors await crucial US data. The horizontal resistance near 1.3405, established from the December 15 high, serves as a barrier for US Dollar bulls.
The 200-period Exponential Moving Average (EMA) at 1.3350 acts as a significant support level for the US Dollar, providing a cushion against further declines.
The Relative Strength Index (RSI) (14) oscillates within the 40.00-60.00 range, reflecting investor anticipation for a potential economic trigger.
A breakout above the January 9 high of 1.3415 could lead to further upside, targeting the December 3 low at 1.3480, followed by the December 5 low at 1.3540.
Conversely, a downside move below the January 5 low at 1.3288 may expose the USD/CAD pair to the December 22 low at 1.3220. A breach of this level could intensify selling pressure, pushing the pair towards the December 27 low at 1.3177.
