USD/CAD remains range-bound ahead of the Canadian inflation data. Over the past week, crude oil price’s sideways trading has supported the currency pair. WTI futures have been trading within a tight range of between $71.00 and $72.50 for a week.
Besides, concerns surrounding the aggressively spreading Delta coronavirus variant have increased the safe-haven appeal of the US dollar. However, the declining US bond yields have curbed the pair’s gains. Since the beginning of July, the benchmark 10-year Treasury yields have dropped by about 15.95%. At the time of writing, the yields were at 1.25, which is significantly lower than the year’s high of 1.77.
In today’s event, investors expect Canadian CPI to have declined to 0.4% in June MoM compared to the prior month’s 0.5%. With the exclusion of the volatile food and energy component, experts expect core CPI to remain unchanged at 0.4% on a month-on-month basis.
USD/CAD will also be reacting to the EIA’s US oil inventory data. The forecasted reading of -2.928 million barrels is better than the prior week’s surprise build of 2.108 million barrels. As a commodity currency, a higher-than-expected figure will boost the Canadian dollar against the greenback. Investors will also be keen on the FOMC statement later in the day.
USDCAD technical outlook
USD/CAD has been range-bound for a week now. The horizontal channel’s upper and lower border are1.2605 and 1.2528 respectively. At the time of writing, it was down by 0.27% at 1.2568. On a two-hour chart, it is trading along the 25 and 50-day EMAs.
In the near term, I expect the pair to remain within the horizontal channel as investors await further cues from today’s events. A bullish breakout will have the next target at the psychological high of 1.2700. Beyond that level, the bulls will be targeting the month’s high of 1.2808.
On the flip side, a move below the lower border at 1.2528 will clear the path towards a lower support level at the psychological 1.2500. Subsequently, the bears will be eyeing the prior support level of 1.2455.