USD/CAD Price Forecast: Seems vulnerable above 1.3800; US PCE Price Index in focus

USD/CAD remains on the defensive for the fourth straight day as traders await US PCE data.
The broader technical setup favors bearish traders and backs the case for further downfall.
A sustained move and acceptance above the 200-period EMA might negate negative bias.

Haresh Menghani FXStreet

The USD/CAD pair struggles to capitalize on the overnight bounce from the 1.3785 region, or the 50% Fibonacci retracement level of the December-January upswing, and trades with a negative bias for the fourth straight day on Thursday. Spot prices, however, manage to hold above the 1.3800 mark as traders await the release of the US Personal Consumption Expenditure (PCE) Price Index before placing fresh directional bets.

From a technical perspective, the overnight break below the 200-period Exponential Moving Average (EMA) on the 4-hour chart and the lack of any buying favors the USD/CAD bears. With spot prices still under the 200-period EMA, rebounds would be capped at the average unless bulls reclaim it decisively. A recovery above the average would ease downside pressure.

The Moving Average Convergence Divergence (MACD) converges toward the Signal line around the zero mark, while the negative histogram contracts, reinforcing a neutral tone. RSI at 43 (neutral) is recovering from oversold, suggesting fading selling pressure. The 38.2% Fibo. level at 1.3822 offers initial support; a close beneath it could open the 50% Fibo. level at 1.3787.

A sustained move of MACD above zero would strengthen bullish momentum, while the RSI below 50 keeps upside restrained for now. Holding above the 38.2% retracement would preserve a shallow pullback; failure to do so would leave the 50% retracement at 1.3787 vulnerable and extend the corrective leg.

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

USD/CAD 4-hour chart

Economic Indicator

Core Personal Consumption Expenditures - Price Index (YoY)

The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures." Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Why it matters to traders?

After publishing the GDP report, the US Bureau of Economic Analysis releases the Personal Consumption Expenditures (PCE) Price Index data alongside the monthly changes in Personal Spending and Personal Income. FOMC policymakers use the annual Core PCE Price Index, which excludes volatile food and energy prices, as their primary gauge of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible hawkish shift in the Fed’s forward guidance and vice versa.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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