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USD/CAD Price Analysis: Trading in a tight range above 1.3600 awaiting US inflation.

  • USD/CAD remains sideways near 1.3600 with US inflation in focus.
  • Core CPI is estimated to have grown steadily by 3.4% both monthly and annually.
  • Weakening Canadian labor market conditions raise prospects for BoC rate cuts.

The USD/CAD pair is consolidating in a tight range above the 1.3600 round-level support in the European session on Thursday. The Loonie asset remains sideways as investors await the United States (US) consumer inflation data for June, due out at 12:30 GMT.

The US Consumer Price Index (CPI) report is expected to show that annual and monthly core inflation, which excludes volatile food and energy prices, rose steadily by 3.4% and 0.2%, respectively. Annual headline inflation is estimated to have slowed to 3.1% from 3.3% in May.

Inflation data will show the strength in market speculation that the Federal Reserve (Fed) will start cutting interest rates from the September meeting. Ahead of the US inflation data, the US Dollar Index (DXY), which tracks the value of the greenback against six major currencies, remains on the defensive around 105.00.

Meanwhile, the Canadian dollar is under pressure amid growing speculation that the Bank of Canada (BoE) will make subsequent rate cuts. Deteriorating Canadian labour market conditions have raised expectations for further rate cuts by the BoE.

USD/CAD is exhibiting a sharp volatility squeeze, trading in a range-bound 1.3600-1.3780 for over two months. A volatility squeeze suggests lower volume and small ticks, while a breakout results in wider ticks and high volume.

The asset is trading below the 20-day exponential moving average (EMA) near 1.3663, suggesting that the near-term outlook is bearish.

The 14-period Relative Strength Index (RSI) is fluctuating within the range of 40.00-60.00, indicating indecision among market participants.

A decisive break below the May 3 low around 1.3600 will expose the asset to the April 9 low around 1.3547 and the psychological support at 1.3500.

On the other hand, a fresh buying opportunity would emerge if the asset breaks above the June 11 high near 1.3800. This would take the asset towards the April 17 high at 1.3838, followed by the November 1, 2023 high at 1.3900.

USD/CAD daily chart

Economic indicator

Consumer Price Index (YoY)

The CPI is published on US Labor Department and measures price movements by comparing retail prices of a representative basket of goods and services. The purchasing power of the dollar is diminished by inflation. The CPI is a key indicator for measuring inflation and purchasing trends. A reading above expectations is bullish for the dollar, while a reading below expectations is bearish.



Read more.

Next post:
Thu Jul 11, 2024 12:30 PM

Frequency:
Monthly

Dear:
3.1%

Previous:
3.3%

Fountain:

US Bureau of Labor Statistics


The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to this mandate, inflation should be around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures continue to rise amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

Source: Fx Street

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