USD/CAD displays signs of relief after correcting for three consecutive days. Last week, the currency pair fell 0.33% after a rejection from the 1.365 resistance level. The US Dollar to Canadian dollar exchange rate now stands at 1.35694, up 0.13% on Wednesday.
The recent recovery in the USDCAD currency pair can be attributed to a strong surge in the dollar. The DXY, which is a measure of the US dollar strength, is rising today ahead of the US CPI data release. The dollar strength Index currently stands at 104.757, up 0.2% till press time.
US CPI Data To Be Announced Today
The Bureau of Labor Statistics will announce the inflation data for August 2023 on Wednesday. This data is very important as it will impact the strength of the US dollar. According to analysts, the US consumer price index is likely to increase by 0.6% compared to July’s 0.2%. The dollar is expected to see an increase in demand if the CPI data comes above expectations.
The CPI data for August is highly anticipated as it will also affect next week’s FOMC meeting. The Federal Reserve will use the CPI data to decide whether to raise interest rates further. According to the CME FedWatch tool, 93% of the market expects no change in interest rates in the next FOMC meeting.
USD/CAD Pair Forecast
The chart for USD/CAD shows the pair trading 0.6% below the 1.365 key resistance level. Previously, the pair retested the same resistance level twice but failed to break out. A deeper analysis of the chart reveals the price has surged by 2.9% after breaking out from the falling wedge pattern.
The USD/CAD forecast can flip bullish if the forex pair breaks above the 1.365 resistance level. In this case, I expect a 1.27% rally towards the yearly high of $1.382. However, if the currency pair catches headwinds, the bears can expect a correction toward the 200 MA level at 1.346.
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