On Wednesday, the USDCAD currency pair shows a moderate decline as traders await important US inflation data. Reports may provide insight into the Federal Reserve's (Fed) future interest rate policy.
According to data released on Tuesday, US producer prices rose more than forecast in April, due to a significant increase in the cost of goods and services. This suggests that inflation remained high at the start of the second quarter.
Fed Chairman Jerome Powell expects inflation to continue to fall in 2024, as it did last year. He noted that further rate hikes are unlikely.
Meanwhile, Cleveland Fed President Loretta Mester sees the need to hold rates steady and wait for further evidence of easing price pressures.
Consumer Price Index (CPI) data for April will be released later on Wednesday. If inflation comes in higher than expected, it could lead to a more hawkish stance from the Fed.
Meanwhile, investors following Canadian monetary policy have shifted their expectations for a rate cut in the country from June to July. These expectations are linked to Friday's employment data, which showed that the Canadian economy added five times more jobs than forecast.
From a technical point of view, the USDCAD rate is forming an upward corrective trend on the D1 timeframe. The price is close to the channel support, which indicates the end of the short-term decline and a possible reversal of the trend. The convergence of the Relative Strength Index (RSI) indicator on the H4 timeframe confirms the strength of the existing upward trend.
Signal:
Short-term prospects for USDCAD suggest buying.
The target is at the level of 1.3800.
Part of the profit should be taken near the level of 1.3730.
A stop-loss could be placed at the level of 1.3550.
The bullish trend is short-term, so trade volume should not exceed 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
