USD/CAD price Consolidation observed near 1.3650 before the Fed’s preferred inflation gauge was released.
FUNDAMENTAL OVERVIEW:
- USD/CAD moves horizontally in anticipation of the US core PCE inflation data, which is likely to impact expectations regarding Fed rate cuts.
- The US Dollar continues to weaken following concerns raised by the disappointing US Q1 GDP figures, prompting investors to anticipate a shift by the Bank of Canada towards interest rate cuts starting in June.
During Friday’s European session, the USD/CAD pair remains within a narrow range of 1.3650. The Canadian dollar is grappling with uncertainty, lacking a clear direction. In contrast, the US dollar stabilizes in anticipation of the release of the United States core Personal Consumption Expenditure Price Index (PCE) data for March, scheduled for 12:30 GMT.
The monthly analysis suggests a steady rise of 0.3% in the underlying inflation data. On an annual basis, the inflation rate is projected to decrease to 2.6% from its previous mark of 2.8%. The core PCE Price Index considered the Federal Reserve’s preferred inflation indicator, is anticipated to shape speculation regarding the timing of potential interest rate adjustments by the central bank. Currently, financial markets are looking toward the September meeting for such moves.
During the London session, the US Dollar Index (DXY) shows a slight increase, reaching 105.70. However, it experienced a significant decline on Thursday following the release of the US Q1 Gross Domestic Product (GDP) report. The report indicated that the economy expanded at a slower pace of 1.6% compared to the consensus forecast of 2.5% and the previous reading of 3.4%. This outcome has raised concerns about the economic prospects of the United States.
Throughout the week, the Canadian Dollar has maintained its strength against the US Dollar, even amidst strong beliefs that the Bank of Canada (BoC) will commence interest rate reductions starting from the June meeting. Declining inflation, sluggish Retail Sales, and a relaxed labor market environment have fueled speculations of rate cuts by the BoC in June.
USD/CAD TECHNICAL ANALYSIS DAILY CHART:
Technical Overview:
USD/CAD is trading within a up 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: 1.3730
Immediate support level: 1.3645
HOW TO TRADE USD/CAD
After experiencing a sharp increase, the USD/CAD pair encountered resistance and began to decline. Presently, it has formed a bearish engulfing pattern, indicating bearish momentum and moving toward a support zone. If this support zone is breached, further decline may be expected.