USD/CAD Price Forecast: Strives to extend recovery above 20-day EMA

• USD/CAD ticks higher to near 1.3653 ahead of the FOMC Minutes release.
• Canada’s headline inflation grew moderately by 2.3% YoY in January.
• USD/CAD might see more upside if it breaks above the supply zone around 1.3730.

The USD/CAD pair trades marginally higher to near 1.3653 during the early European trading session on Wednesday. The Loonie pair edges up as the US Dollar (USD) ticks higher ahead of the release of the Federal Open Market Committee (FOMC) Minutes at 19:00 GMT.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is up 0.1% to near 97.20.

Investors will pay close attention to the FOMC Minutes to get cues on the Federal Reserve’s (Fed) monetary policy outlook. At the January policy meeting, the Fed decided to pause its monetary easing cycle and left interest rates unchanged in the range of 3.50%-3.75%.

Meanwhile, the Canadian Dollar (CAD) trades broadly calm even after underperforming on Tuesday. The CAD came under pressure the previous day after the release of the Consumer Price Index (CPI) data for January, which showed that price pressures grew moderately. The Canadian headline inflation dropped to 2.3% Year-on-Year (YoY), while it was expected to remain flat at 2.4%.

USD/CAD technical analysis

USD/CAD trades slightly higher at around 1.3655 at the press time. The pair straddles the 20-day Exponential Moving Average (EMA) at 1.3654, which has flattened after a steady decline. The softening slope reduces downside momentum and frames the average as a near-term pivot.

The 14-day Relative Strength Index (RSI) at 48 (neutral) corroborates a balanced bias.

Focus turns to a daily close away from the 20-day EMA to unlock direction. A sustained break and hold above the average could open room for an extension towrads the supply zone around 1.3740. The price could advance further towards the round-level figure of 1.3800 if it breaks and holds above 1.3740. Looking down, the psychological level of 1.3500 will remain a key support area.

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