On Tuesday, the Canadian dollar (CAD) managed to gain some ground against the U.S. dollar (USD), recovering losses seen earlier in the day. While bullish momentum seems to be lacking, loonie traders are definitely looking for any signs of support as they navigate through the recent six-month lows.
Canada’s consumer price index (CPI) inflation rate exceeded expectations on Tuesday, putting additional pressure on those monitoring interest rates at the Bank of Canada (BoC). With inflation remaining above the central bank’s target range, the BoC may find it challenging to reduce interest rates further amidst the struggles of the Canadian economy, which has been affected by trade tariffs from the U.S.
Daily Digest Market Movement: Canadian Dollar Curbs Post-CPI Losses
- Although the Canadian dollar saw some gains during mid-session, it still hovers near a six-month low against the US dollar.
- The USD/CAD pair remains constrained under a technical barrier just above 1.4050.
- Canada’s CPI inflation rate increased more than anticipated in September, with the year-on-year headline CPI reaching 2.4%.
- With inflation indicators rising again in Canada, it may prove more challenging for the central bank to pursue further rate cuts to support the economy, though another rate cut remains a possibility.
- The release of U.S. CPI inflation data on Thursday will likely be crucial for data watchers this week.
Canadian dollar price prediction
The daily chart for USD/CAD reveals the U.S. dollar trading around 1.4025 against the Canadian dollar, testing resistance near 1.4080 before pulling back slightly. The pair has been on an upward trend since early September, creating a clear pattern of highs and lows. The 50-day exponential moving average (EMA) is currently positioned at about 1.3900, which exceeds the 200-day EMA of 1.3885, forming what’s commonly referred to as a “golden cross.” This pattern generally indicates improved momentum and buying intent in the medium-term outlook.
Market trends indicate a pause after a strong rally, as sellers are beginning to show up in the 1.4070-1.4100 range, which has acted as a resistance zone in recent trading. On the downside, the 1.3950 to 1.3900 range seems to be the initial support level. If buyers can maintain protection over this area, the overall upward trend could stay intact, but a break below might lead to a deeper retracement to around 1.3800.
The Relative Strength Index (RSI) is around 62, indicating there’s no immediate risk of being overbought and showing steady bullish momentum. There is potential for further gains if new catalysts emerge to support this movement.
In summary, the market for the pair continues to hold a positive tone, but signs of fatigue are evident around the 1.41 mark. Traders might be waiting for new data from the U.S. or comments from the Bank of Canada before they commit to the next upward move.
