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USD/CAD drops to near 1.3360 on upbeat market sentiment.
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A quite action is anticipated ahead of the US Inflation data.
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Oil prices recover amid uncertainty over commercial shipment from Red Sea.
The USD/CAD pair fell near 1.3360 after failing to hold above the key resistance of 1.3400. Loonie assets continue to struggle as demand for safe-haven assets diminishes due to increased risk-appetite among market participants.
S&P500 futures extended rally in Asian session, illustrating improved demand for risk-sensitive assets. The US dollar index (DXY) corrected near 102.20 as bets favor the first rate cut by the Federal Reserve (Fed) in March after the historically tight rate-hiking campaign was intact ahead of the US Consumer Price Index (CPI) ) December data, which Will be released at 13:30 GMT
Annual headline inflation data is forecast to rise 3.2%, up slightly from November’s reading of 3.1%. At the same time, core CPI excluding volatile food and oil prices is seen growing at a slower pace of 3.8% against 4.0%.
On the oil front, oil prices made a modest recovery near $72.00 as tensions deepened in the Middle East region. Attacks on commercial oil tankers transiting the Red Sea are delaying shipments and causing supply shortages. It is worth noting that Canada is the leading exporter of oil to the US and higher oil prices support the Canadian dollar.
USD/CAD continues to consolidate in the 1.3340-1.3400 range on the hourly scale. Loonie assets struggle for direction as investors await US data. The horizontal resistance plotted since December 15 near 1.3405 continues to act as a barricade for US dollar bulls.
The 200-period exponential moving average (EMA) near 1.3350 will act as a major cushion for the USD.
The Relative Strength Index (RSI) (14) oscillates in a 40.00-60.00 range as investors await a potential economic trigger.
If the Loonie asset breaks above the high of 1.3415 on January 9, it will show fresh upside. It will open to the upside at the December 3 low of 1.3480, followed by a December 5 low of 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
