USD/CAD Price Forecast: Finds temporary support near 20-day EMA

USD/CAD falls further to near 1.3850 amid weakness in the US Dollar.
US-EU disputes over Greenland’s entitlement have weighed on US assets.
Canadian inflation grew at a faster pace year-on-year (YoY) in December.

Sagar Dua FXStreet

The USD/CAD pair trades 0.13% lower to near 1.3850 during the early European trading session on Tuesday. The Loonie pair is under pressure as the US Dollar (USD) remains on the back foot amid disputes between the United States (US) and the European Union (EU) over the future of Greenland.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.12% down to near 98.90.

The investment risk premium of the US Dollar has diminished as President Donald Trump has imposed 10% tariffs on several EU members and the United Kingdom (UK) for opposing Greenland’s acquisition plans, with scope for further increase. In response, EU members have condemned Trump’s tariff tactic and have threatened equal countermeasures.

Meanwhile, the Canadian Dollar (CAD) trades higher after mix Consumer Price Index (CPI) data release on Monday. The CPI report showed that price pressures grew at a faster pace on an annualized basis in December, but deflated month-on-month (MoM).

USD/CAD technical analysis

USD/CAD trades lower at around 1.3850 as of writing. However, the outlook of the pair remains bullish as the 20-day Exponential Moving Average (EMA) accelerates to 1.3839, and price holds marginally above it, preserving a recovery stance.

The 14-day Relative Strength Index (RSI) at 52 (neutral) after a rebound from oversold readings confirms momentum stabilization.

Measured from the 1.4139 high to the 1.3642 low, the pair corrects to near the 38.2% Fibonacci retracement at 1.3832 after struggling to stabilze above the 50% Fibonacci retracement at 1.3890.

The 20-day EMA’s positive slope supports the bounce, with the pair consolidating above the average. A decisive bounce above the January 16 high of 1.3929 would lead to a fresh upside leg towards the psychological level of 1.4000. On the contrary, a close below 38.2% Fibonacci retracement at 1.3832 would weaken the near-term setup and extend the corrective leg toward 23.6% Fibonacci retracement at 1.3759.

(The technical analysis of this story was written with the help of an AI tool.)

Economic Indicator

Consumer Price Index (YoY)

The Consumer Price Index (CPI), released by Statistics Canada on a monthly basis, represents changes in prices for Canadian consumers by comparing the cost of a fixed basket of goods and services. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.

EUR/USD weakens to near 1.1900 as traders eye US data

The EUR/USD pair loses ground to around 1.1905, snapping the two-day winning streak during the early European trading hours on Tuesday. Markets might turn cautious ahead of the release of key US economic data, including US employment and inflation reports that were pushed back slightly due to the recently ended four-day government shutdown.

GBP/USD edges lower below 1.3700 on UK political risks, BoE rate cut bets

The GBP/USD pair trades on a weaker note around 1.3685 during the European session on Tuesday. The Pound Sterling edges lower against the US Dollar amid political risk in the United Kingdom and rising expectations of near-term Bank of England rate cuts.

Gold drifts lower as positive risk tone tempers safe-haven demand; downside seems limited

Gold drifts lower during the Asian session on Tuesday and snaps a two-day winning streak, though it lacks strong follow-through selling and shows some resilience below the $5,000 psychological mark amid mixed cues. The outcome of Japan's snap election on Sunday removes political uncertainty, which, along with signs of easing tensions in the Middle East, remains supportive of the upbeat market mood.

Bitcoin Cash trades lower, risks dead-cat bounce amid bearish signals

Bitcoin Cash trades in the red below $522 at the time of writing on Tuesday, after multiple rejections at key resistance. BCH’s derivatives and on-chain indicators point to growing bearish sentiment and raise the risk of a dead-cat bounce toward lower support levels.

Follow the money, what USD/JPY in Tokyo is really telling you

Over the past two Tokyo sessions, this has not been a rate story. Not even close. Interest rate differentials have been spectators, not drivers. What has moved USD/JPY in local hours has been flow and flow alone.

Bitcoin Cash trades lower, risks dead-cat bounce amid bearish signals

Bitcoin Cash (BCH) trades in the red below $522 at the time of writing on Tuesday, after multiple rejections at key resistance. BCH’s derivatives and on-chain indicators point to growing bearish sentiment and raise the risk of a dead-cat bounce toward lower support levels.