USD/CAD Price Analysis: Corrects to near 1.3360 ahead of US Inflation data

• USD/CAD drops to near 1.3360 on upbeat market sentiment.
• A quite action is anticipated ahead of the US Inflation data.
• Oil prices recover amid uncertainty over commercial shipment from Red Sea.

The USD/CAD pair drops to near 1.3360 after failing to sustain above the crucial resistance of 1.3400. The Loonie asset continues to struggle as demand for safe-haven assets has dampened due to improved risk-appetite of the market participants.

S&P500 futures extended rally in the Asian session, portraying improved appeal for risk-sensitive assets. The US Dollar Index (DXY) has corrected to near 102.20 as bets in favour of first rate-cut by the Federal Reserve (Fed) in March after a historically tight rate-hiking campaign remains intact ahead of the United States Consumer Price Index (CPI) data for December, which will be published at 13:30 GMT.

The annual headline inflation data is forecasted to grow by 3.2%, slightly higher than November’s reading of 3.1%. In the same period, the core CPI that excludes volatile food and oil prices is seen rising at a slower pace of 3.8% against 4.0%.

On the oil front, oil prices deliver a moderate recovery to near $72.00 as tensions in Middle East region deepens. Attacks on commercial oil tankers passing through Red Sea are delaying shipment and resulting in supply shortage. It is worth noting that Canada is the leading exporter of oil to the United States and higher oil prices support the Canadian Dollar.

USD/CAD continues to consolidate in a range of 1.3340-1.3400 on an hourly scale. The Loonie asset struggles for a direction as investors await the US data. Horizontal resistance plotted from December 15 high around 1.3405 continues to act as barricade for US Dollar bulls.

The 200-period Exponential Moving Average (EMA) around 1.3350 will act as a major cushion to the US Dollar.

The Relative Strength Index (RSI) (14) oscillates in a 40.00-60.00 range as investors await a potential economic trigger.

Fresh upside would appear if the Loonie asset breaks above January 9 high of 1.3415. This would open upside towards December 3 low at 1.3480, followed by December 5 low at 1.3540.

On the flip side, a downside move below January 5 low at 1.3288 would expose the asset to December 22 low at 1.3220. Breach of the latter would build more pressure on the asset and will drag it towards December 27 low at 1.3177.

USD/CAD hourly chart