- USD/CAD exhibits strength above 1.3500 ahead of an eventful week.
- The Fed is widely anticipated to hold interest rates unchanged in the range of 5.25%-5.50%.
- The Canadian Dollar faces pressure ahead of consumer inflation data for February.
The USD/CAD pair seems comfortable above the psychological resistance of 1.3500 in the European session on Monday. The Loonie asset clings to gains amid uncertainty ahead of the interest rate decision by the Federal Reserve (Fed), which will be announced on Wednesday.
While the Fed is certain to keep interest rates unchanged in the range of 5.25%-5.50%, market participants will keenly focus on the release of the dot plot, which details policymakers’ projections for interest rates over time and the latest economic projections.
The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, drops slightly to 103.40, while the Loonie asset is positive, indicating weakness in the Canadian Dollar.
The Canadian Dollar has come under pressure ahead of the February inflation data, which will be published on Tuesday. The annual headline Consumer Price Index (CPI) is anticipated to have accelerated to 3.1% from 2.9% in January. Hotter-than-anticipated inflation data will delay the Bank of Canada’s (BoC) plans to reduce interest rates.
USD/CAD trades inside Friday’s trading range around 1.3540. Earlier, the Loonie asset rebounded from the upward-sloping border of the Ascending Triangle pattern formed on a daily timeframe, plotted from the December 27 low at 1.3177. The horizontal resistance of the aforementioned pattern is placed from December 7 high at 1.3620.
The 50-day Exponential Moving Average (EMA) near 1.3500 continues to support the US Dollar bulls.
The 14-period Relative Strength Index (RSI) oscillates inside the 40.00-60.00 region, which indicates indecisiveness among investors.
The fresh upside would appear if the asset breaks above the December 7 high at 1.3620, which will drive the asset towards the May 26 high at 1.3655, followed by the round-level resistance of 1.3700.
On the flip side, a downside move below February 22 low at 1.3441 would expose the asset to February 9 low at 1.3413. A breakdown below the latter would extend downside towards January 15 low at 1.3382.
USD/CAD daily chart
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