The USD/CAD pair has entered a sideways phase around the level of 1.3553 following a strong start in the Asian session. Investors are displaying a cautious stance as they await the release of Canada’s Consumer Price Index (CPI) and closely monitor negotiations regarding the US debt-ceiling talks for further guidance.

After reaching a fresh five-week high of 102.75, the US Dollar Index (DXY) has lost some upward momentum, contributing to a boost in risk-sensitive assets and reflecting an improvement in overall market sentiment.

In terms of economic data, analysts anticipate a softening of Canada’s core CPI from 4.3% to 3.9% compared to the previous release. Furthermore, the headline CPI is expected to decline to 3.7% from the previous 4.3%.

The release of Canada’s inflation report, as predicted, will provide insight into the Bank of Canada’s (BoC) future monetary policy decisions.

On a four-hour scale, the USD/CAD pair is currently approaching a downward-sloping trendline originating from its March 10 high at 1.3862. A broader observation reveals that the Loonie asset is forming an Ascending Triangle chart pattern, indicating a reduction in volatility.

Continuously offering support to USD bulls, the 20-period Exponential Moving Average (EMA) stands at 1.3486.

The Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, suggesting the continuation of upward momentum.

The bullish bias will strengthen if the USD/CAD pair manages to overcome the significant resistance level at 1.3600. This breakthrough would open the door to the May 21 low at 1.3644, followed by the round-level resistance at 1.3700.

Conversely, a breach of the May 12 low at 1.3480 would diminish the upward bias and push the pair towards the April 4 low at 1.3406, and subsequently, the May 8 low at 1.3315.


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