USD/CAD Price Analysis: Rises to 1.3800 ahead of US CPI and Fed’s policy decision


  • USD/CAD climbs to near 1.3800 as the US Dollar strengthens ahead of a volatile Wednesday.
  • Investors will keenly focus on the Fed’s dot plot for the interest rate outlook.
  • BoC Macklem may provide cues over subsequent rate cuts.

The USD/CAD pair jumps to near the round-level resistance of 1.3800 in Tuesday’s American session. The Loonie asset strengthens as the US Dollar (USD) rises to the monthly high. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps to 105.40 as market sentiment remains risk-averse 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 for Wednesday.

The S&P 500 delivered significant losses in the opening session, exhibiting investors' weak risk appetite. Investors remain cautious ahead of the Fed’s dot-plot, which will indicate where policymakers see the Federal fund rate heading. The Fed’s decision on interest rates is widely expected to be unchanged, as inflation is far from the desired rate of 2%.

Fed officials have been advocating for maintaining the current interest rate framework for a long time until they gain greater confidence that inflation is progressively declining. Soft inflation data for three or four months could build that confidence among policymakers.

Meanwhile, the Canadian Dollar will dance to the tunes of the speech from Bank of Canada (BoC) Governor Tiff Macklem, which is scheduled for Wednesday. BoC Macklem will provide more cues about whether the central bank will announce subsequent rate cuts.

USD/CAD strengthens after a breakout of the Descending Triangle chart pattern formed on a daily timeframe. The upward-sloping 20-day Exponential Moving Average (EMA) near 1.3700 suggests that the near-term trend is bullish.

The 14-period Relative Strength Index (RSI) jumps above 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 1.3778
Today Daily Change 0.0019
Today Daily Change % 0.14
Today daily open 1.3759
 
Trends
Daily SMA20 1.3668
Daily SMA50 1.3677
Daily SMA100 1.3593
Daily SMA200 1.3579
 
Levels
Previous Daily High 1.3782
Previous Daily Low 1.3754
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% 1.3771
Daily Pivot Point S1 1.3748
Daily Pivot Point S2 1.3737
Daily Pivot Point S3 1.372
Daily Pivot Point R1 1.3776
Daily Pivot Point R2 1.3793
Daily Pivot Point R3 1.3804

 

 

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