USD/CAD climbs above 1.3700 ahead of Core PCE inflation data
FUNDAMENTAL OVERVIEW:
- USD/CAD continues its upward trend due to rising US Treasury yields.
- The US Core PCE inflation, the Fed’s preferred measure, is expected to drop to 2.6% YoY from 2.8%.
- Canada’s GDP (MoM) is anticipated to grow by 0.3% in April, compared to no growth in March.
USD/CAD continues its upward trend for the fourth consecutive day, trading near 1.3710 during Friday’s European session. Investors are closely watching the Core PCE Price Index inflation data, which is expected to decline to 2.6% year-over-year from the previous 2.8%. This data is considered the Federal Reserve’s preferred inflation gauge.
Higher yields on US Treasury bonds bolster the US Dollar (USD) and support the USD/CAD pair. This support stems from increased risk aversion following Thursday’s data showing US economic expansion. The Gross Domestic Product Annualized grew by 1.4% in Q1, slightly above the previous 1.3% reading, yet still indicating the slowest growth since the contractions in early 2022.
The US Dollar Index (DXY), which gauges the USD’s value against six major currencies, remains steady above 106.00. Meanwhile, the 2-year and 10-year US Treasury yields are at 4.72% and 4.29%, respectively.
USD/CAD TECHNICAL ANALYSIS DAILY CHART:
Technical Overview:
USD/CAD is trading within a down channel.
USD/CAD is moving below all the Moving Averages (SMA).
The Relative Strength Index (RSI) is in a Neutral zone, while the Stochastic oscillator suggests a Negative trend.
Immediate Resistance level: 1.3734
Immediate support level: 1.3673
HOW TO TRADE USD/CAD
After rising, USD/CAD faced rejection at the resistance level and declined. It has since been consolidating within a range. Currently, the price is pressing lower around a key support level, and if this level is broken, further decline is possible.