- USD/CAD faces selling pressure as the US Dollar Index retreats.
- Fed policymakers keep avoiding speculating over the timing of rate cuts.
- The Canadian Dollar will dance to the tunes of Employment data.
The USD/CAD pair trades near the day’s low around 1.3470 in Wednesday’s European session as the US Dollar Index (DXY) has corrected to near 104.00 from an 11-week high of 104.60. The USD Index failed to hold strength despite Federal Reserve (Fed) policymakers not being ready to speculate about rate cuts.
The market mood seems asset-specific as S&P500 futures are subdued while investors have underpinned risk-perceived currencies against the US Dollar.
Fed policymakers are uncomfortable about offering any time when the central bank will begin reducing interest rates as they still need more confidence that inflation will sustainably return to the 2% target. Strength in the labor market and resilient consumer spending have faded prospects for inflation returning to 2%.
Meanwhile, the Canadian Dollar will be guided by the Employment data for January, which will be published on Friday. The Unemployment Rate is seen rising to 5.9% from 5.8% in December.
USD/CAD faces selling pressure while attempting to deliver a breakout of the Ascending Triangle formation on a four-hour timeframe. The aforementioned chart pattern indicates a volatility contraction but with a positive bias.
The horizontal resistance of the Ascending Triangle chart pattern is plotted from January 17 high at 1.3542, while the upward-sloping trendline is placed from December 29 low at 1.3178. The Loonie asset has dropped near the 20-period Exponential Moving Average (EMA), which trades around 1.3470.
The 14-period Relative Strength Index (RSI) failed to sustain above 60.00, which indicates lower buying strength at higher levels.
A buying opportunity would emerge if the Loonie asset breaks above the January 17 high at 1.3542, which will drive the asset towards the round-level resistance of 1.3600, followed by the November 30 high at 1.3627.
On the flip side, a breakdown below January 31 low at 1.3359 will expose the asset to January 4 low at 1.3318 and January 5 low at 1.3288.
USD/CAD four-hour chart
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