USD/CAD Price Outlook: Remains steady under 1.3900; awaits new direction from US CPI data

USD/CAD Holds Steady Ahead of Key US Inflation Data

The USD/CAD currency pair is trading within a tight range just below the 1.3900 level as the European session approaches on Tuesday. After pulling back from its highest point since early December last Friday, the pair has paused its decline, with traders awaiting the upcoming US inflation report for further direction.

Later today, the US Consumer Price Index (CPI) will be released, followed by the Producer Price Index (PPI) on Wednesday. In anticipation of these important economic indicators, the US Dollar has regained some strength after Monday’s losses, lending support to the USD/CAD pair. However, concerns regarding the Federal Reserve’s autonomy are limiting further gains for the greenback. Additionally, the recent uptick in crude oil prices is benefiting the Canadian Dollar, which is closely tied to commodities, and is putting pressure on the pair.

Technical Overview

On the technical front, USD/CAD remains below its 50-day Simple Moving Average (SMA), which continues to trend downward, signaling a bearish outlook. The SMA, located near 1.3890, has acted as a ceiling for any attempts to rebound. The Moving Average Convergence Divergence (MACD) indicator shows the MACD line above the Signal line and slightly in positive territory, but the shrinking histogram suggests that upward momentum is fading. Meanwhile, the Relative Strength Index (RSI) stands at 59, indicating a mildly bullish sentiment without entering overbought territory.

Key Resistance Levels

• Fibonacci retracement levels, measured from the 1.4134 high to the 1.3646 low, present significant resistance overhead.
• The 50% retracement sits at 1.3890, while the 61.8% level is at 1.3948, both acting as barriers to further gains.
• A daily close above 1.3948 could open the door to the 78.6% retracement at 1.4030.
• If the pair fails to break above 1.3890, it is likely to remain in a consolidation phase below resistance.

In summary, while momentum has shown some improvement, the downward-sloping SMA and closely grouped Fibonacci resistance levels are restricting further advances. Bulls will need a clear move above these technical barriers to sustain any upward trend.

(This technical analysis incorporates insights generated with the assistance of AI tools.)

USD/CAD Daily Chart