USD/CAD Price Analysis: Consolidates around 1.3650 ahead of Fed’s preferred inflation gauge

Source Fxstreet
Apr 26, 2024 11:21
  • USD/CAD trades sideways ahead of the US core PCE Inflation that will influence Fed rate cut expectations.
  • The US Dollar remains on backfoot as weak US Q1 GDP raise concerns over the economic outlook.
  • Investors see the BoC pivoting to interest rate cuts from June.

The USD/CAD pair is stuck in a tight range near 1.3650 in Friday’s European session. The Loonie asset struggles for a direction as the US Dollar consolidates ahead of the United States core Personal Consumption Expenditure Price Index (PCE) data for March, which will be published at 12:30 GMT.

On a monthly basis, the underlying inflation data is estimated to have increased steadily by 0.3%. Annually, the inflation measure is seen decelerating to 2.6% from the prior reading of 2.8%. The core PCE Price Index is the Federal Reserve’s (Fed) preferred inflation gauge, which is expected to influence speculation about when the central bank pivots to interest rate cuts, which financial markets are currently anticipating from the September meeting.

The US Dollar Index (DXY) is slightly up at 105.70 in the London session but fell sharply on Thursday after the US Q1 Gross Domestic Product (GDP) report showed that the economy expanded at a slower rate of 1.6% from the consensus of 2.5% and the prior reading of 3.4%. This has triggered doubts over the US economic outlook.

Meanwhile, the Canadian Dollar has remained underpinned against the US Dollar this week despite firm expectations that the Bank of Canada (BoC) will start reducing interest rates from the June meeting. Easing inflation, weak Retail Sales and loosening labor market conditions have boosted BoC rate cut bets for June.

USD/CAD corrects to near the breakout region of the Ascending Triangle chart pattern formed on a daily timeframe. The retest of the breakout region is keenly tracked by investors to build fresh longs as it is considered a discounted price. The 50-day Exponential Moving Average (EMA) near 1.3620 will provide support to the US Dollar bulls.

The 14-period Relative Strength Index (RSI) falls into the 40.00-60.00. The RSI is expected to rebound from 40.00 as the upside bias remains intact. However, a breakdown below the same will increase the odds of a bearish reversal.

Fresh buying opportunity would emerge if the asset falls further to near April 8 high at 1.3617. This would drive the asset towards April 11 low at 1.3661, followed by the round-level resistance of 1.3700.

In an alternate scenario, a breakdown below April 9 low around 1.3547 will expose the asset to the psychological support of 1.3500 and March 21 low around 1.3456.

USD/CAD daily chart

USD/CAD

Overview
Today last price 1.3658
Today Daily Change 0.0001
Today Daily Change % 0.01
Today daily open 1.3657
 
Trends
Daily SMA20 1.3663
Daily SMA50 1.3583
Daily SMA100 1.3499
Daily SMA200 1.3539
 
Levels
Previous Daily High 1.3731
Previous Daily Low 1.365
Previous Weekly High 1.3846
Previous Weekly Low 1.3724
Previous Monthly High 1.3614
Previous Monthly Low 1.342
Daily Fibonacci 38.2% 1.3681
Daily Fibonacci 61.8% 1.37
Daily Pivot Point S1 1.3628
Daily Pivot Point S2 1.3599
Daily Pivot Point S3 1.3547
Daily Pivot Point R1 1.3709
Daily Pivot Point R2 1.3761
Daily Pivot Point R3 1.379

 

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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