The USD/CAD pair is currently consolidating above the key support level of 1.3600 in Thursday’s European session, as market participants await the release of the US Consumer Price Index (CPI) data for June at 12:30 GMT.
Investors are anticipating the CPI report to reveal steady growth in annual and monthly core inflation, excluding volatile food and energy prices, with estimates of 3.4% and 0.2% respectively. Annual headline inflation is expected to have eased to 3.1% from 3.3% in May.
The inflation figures will likely influence speculation regarding the Federal Reserve’s timeline for interest rate cuts, with expectations heightened for a potential reduction starting from the September meeting. Ahead of the data release, the US Dollar Index (DXY), which measures the Greenback against a basket of major currencies, remains subdued around 105.00.
Conversely, the Canadian Dollar faces pressure amid increasing speculation that the Bank of Canada (BoC) may implement further rate cuts. Deteriorating conditions in the Canadian labor market have bolstered expectations for additional monetary easing by the BoC.
USD/CAD has shown significant volatility contraction, trading within a narrow range of 1.3600-1.3780 for over two months. Such contraction typically indicates lower trading volume and minimal price movements, potentially leading to increased volatility upon a breakout.
The pair is currently trading below the 20-day Exponential Moving Average (EMA) near 1.3663, suggesting a bearish near-term outlook. The 14-period Relative Strength Index (RSI) is oscillating between 40.00 and 60.00, reflecting indecision among traders.
A decisive break below the low of May 3 around 1.3600 could expose the pair to further downside towards the low of April 9 at 1.3547 and the psychological support level of 1.3500.
Conversely, a breakout above the high of June 11 near 1.3800 would present a new buying opportunity, potentially driving the pair towards the high of April 17 at 1.3838, followed by the November 2023 high at 1.3900.
Related Topics:
