Anna 
In the currency markets, the USD/CAD pair is currently grappling with uncertainty as investors eagerly await the release of the United States Consumer Price Index (CPI) data for March, scheduled for Wednesday. During Tuesday’s European trading session, the Loonie asset is seen trading sideways, unable to breach the psychological resistance level of 1.3600.
Market analysts are closely monitoring the US inflation data for March as it is expected to provide crucial insights into the Federal Reserve’s (Fed) future monetary policy decisions. Speculation abounds regarding when the Fed might begin reducing interest rates, with expectations riding on the outcome of the CPI figures.
Projections indicate that the US annual headline inflation may have experienced a modest uptick to 3.4% in March, compared to 3.2% recorded in the previous month. However, core inflation, excluding the volatile components of food and energy prices, is anticipated to have marginally decreased from 3.8% to 3.7% during the same period.
The implications of the CPI data are significant, potentially shaping market sentiment and expectations regarding the Fed’s monetary policy trajectory. A softer-than-expected inflation reading could fuel speculation of a potential interest rate cut by the Fed, potentially affecting the USD/CAD pair’s performance in the near term.
Meanwhile, attention is also focused on the Bank of Canada’s (BoC) upcoming interest rate decision, also scheduled for Wednesday. With expectations leaning towards the BoC maintaining interest rates at their current level of 5%, investors will be closely monitoring the central bank’s guidance on future monetary policy amid ongoing economic challenges.
Market observers note that Canada’s labor market is feeling the pinch of higher interest rates, which could prompt a dovish stance from the BoC. Additionally, concerns over inflation persist, with the BoC’s preferred inflation measure, core CPI, having moderated to 2.1% in February.
In terms of technical analysis, the USD/CAD pair is currently trading slightly below the horizontal resistance of an Ascending Triangle formation on the daily timeframe, drawn from the high of December 7 at 1.3620. The presence of the 200-day Exponential Moving Average (EMA) near the 1.3500 level is seen as a critical support for USD bulls.
Amidst these factors, market sentiment remains cautious, with the USD/CAD pair awaiting clear directional cues from the forthcoming CPI data release and the BoC’s interest rate decision. A breakout in either direction is anticipated, with market participants poised to react accordingly to developments on both sides of the border.
