USD/CAD Price Analysis: Corrects from 1.3800 as US Dollar’s rally stalls ahead of Fed’s decision

USD/CAD trades cautiously ahead of US Inflation and Fed’s policy outcome
The Fed is expected to leave interest rates unchanged for seventh straight time.
The BoC could deliver subsequent rate cuts, given weak labor market conditions.

Sagar Dua FXStreet

The USD/CAD pair drops to 1.3740 in Wednesday’s European session after failing to recapture the round-level resistance of 1.3800 on Tuesday. The Loonie asset corrects as firm recovery of almost 1.40$ in the US Dollar Index (DXY) appears to be stalling due to uncertainty ahead of the United States (US) Consumer Price Index (CPI) data for May and the Federal Reserve’s (Fed) interest rate decision, which are scheduled in the North American session.

US annual core CPI, which excludes volatile food and energy prices, is estimated to have eased slightly to 3.5% from April’s release of 3.6%, with headline figures growing steadily by 3.4%. The inflation data turning out to be stubborn would weaken market expectations for the Fed to begin reducing interest rates from the September meeting, while soft number would boost them.

Meanwhile, investors will majorly focus on the Fed’s dot plot as the central bank is expected to remain status quo for the seventh straight time.

The Canadian Dollar remains broadly on the backfoot as investors expect that the Bank of Canada (BoC) could deliver subsequent rate cuts to boost labor demand. Canada’s inflation has already declined into BoC’s preferred core CPI range of 1%-3%.

USD/CAD strengthens after a breakout of the Descending Triangle chart pattern formed on a daily timeframe. Upward-sloping 20- and 50-day Exponential Moving Averages (EMAs) near 1.3700 and 1.3660, respectively, suggest that the overall trend is bullish.

The 14-period Relative Strength Index (RSI) hovers near 60.00. A sustainable move above the same will push momentum towards the upside.

Fresh buying opportunity would emerge if the asset breaks above April 17 high at 1.3838. This would drive the asset towards 1 November 2023 high at 1.3900, followed by the psychological resistance of 1.4000.

In an alternate scenario, a breakdown below June 7 low at 1.3663 will expose the asset to May 3 low around 1.3600 and April 9 low around 1.3547.

USD/CAD daily chart

USD/CAD

Overview
Today last price	1.3749
Today Daily Change	-0.0009
Today Daily Change %	-0.07
Today daily open	1.3758

Trends
Daily SMA20	1.3673
Daily SMA50	1.3681
Daily SMA100	1.3596
Daily SMA200	1.358

Levels
Previous Daily High	1.3792
Previous Daily Low	1.3748
Previous Weekly High	1.3768
Previous Weekly Low	1.3603
Previous Monthly High	1.3783
Previous Monthly Low	1.359
Daily Fibonacci 38.2%	1.3765
Daily Fibonacci 61.8%	1.3775
Daily Pivot Point S1	1.3741
Daily Pivot Point S2	1.3723
Daily Pivot Point S3	1.3697
Daily Pivot Point R1	1.3784
Daily Pivot Point R2	1.381
Daily Pivot Point R3	1.3828

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

AUD/USD extends the range play above 0.7200 as traders await US inflation data

AUD/USD is seen extending its consolidative price move above 0.7200 during the Asian session on Thursday amid mixed cues. Rising RBA rate-hike bets keep the Aussie close to its highest level since May 14. However, hawkish Fed expectations and escalating US-Iran tensions offer some support to the US Dollar, capping the currency pair as traders await US inflation figures.

USD/JPY consolidates around 153.50 as bears turn cautious ahead of US inflation

USD/JPY stabilizes above 153.50 during the Asian session on Thursday, but remains near a seven-month low set earlier this week as hawkish BoJ repricing continues to underpin the Japanese Yen. Meanwhile, rising September Fed rate-hike bets and escalating US-Iran tensions help ease US Dollar selling pressure, offering some support to the currency pair ahead of US inflation figures.

Gold resumes its decline below $4,400

Gold maintains an erratic trade so far this week, now slipping back below the key $4,400 mark per troy ounce following the stronger US Dollar and a strong rebound in US Treasury yields across the curve, particularly following US Producer Prices.

Raydium's rally signals trend reversal amid network growth, buyback

Raydium maintains a firm bullish tone, posting nearly 9% gains, and extending its 41% rally from Sunday. Solana-based Decentralized Exchange is witnessing a surge in network activity and growth amid new token launches. The technical outlook for Raydium signals a potential upside toward $1.50 as momentum holds firm despite overbought conditions.

Jobs opened the door for the Fed — inflation decides whether it walks through

The latest US jobs report did not end the debate over the Federal Reserve’s (Fed) next move. It may have done something more subtle: it gave policymakers permission to keep their options open. After months of softer labour market signals, August delivered a stronger-than-expected rebound.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.