Canadian Dollar remains clipped near multi-year lows

• The Canadian Dollar went nowhere quickly on Monday.
• Looming Bank of Canada rate call keeps CAD markets tepid.
• Investor sentiment finds a fresh patch of concern about US CPI inflation update.

The Canadian Dollar (CAD) struggled to find direction on Monday, kicking off a new trading week digging in near familiar lows. Broad-market sentiment has fizzled as investors are bracing for an expected uptick in US Consumer Price Index (CPI) inflation figures due during the midweek market session, and an overall lack of Canadian representation on this week’s economic calendar leaves Loonie traders in the lurch.

The Bank of Canada (BoC) is slated to deliver its latest rate call on Wednesday, around the time that the US will be releasing its latest CPI inflation figures, which are expected to accelerate slightly. With knock-kneed economic figures coming out of Canada, the BoC is expected to accelerate its pace of rate cuts once again, despite growing potential for another uptick in inflation figures that have hampered the domestic economy.

Daily digest market movers: A quiet start to the week has traders looking ahead

• Markets are coiling ahead of a blustery midweek showing on the data docket.
• Data releases remain thin in the early week.
• The BoC is widely expected to deliver another double rate cut on Wednesday, forecast to trim its main reference rate to 3.25% from 3.75%.
• The US’ upcoming CPI print is expected to show headline consumer-level inflation rise back to 2.7% from 2.6% YoY.
• Core US CPI inflation is expected to hold steady at a heady 3.3% annually.

Canadian Dollar price forecast

The USD/CAD daily chart illustrates a strong uptrend that has been intact since mid-September, with the pair climbing steadily above its 200-day EMA at 1.3726 and the 50-day EMA at 1.3912. The bullish momentum gained traction as USD/CAD broke above the 1.4000 psychological level in late October, consolidating gains in November. The pair recently approached the critical resistance zone near 1.4170, where multiple highs were recorded, signaling an area of strong selling pressure. This level aligns closely with the July peak and remains a significant barrier for bulls.

The most recent candle reflects indecision, closing near 1.4157, with a slight bearish tilt after failing to sustain a breakout above the 1.4170 resistance. Despite reaching an intraday high of 1.4175, the inability to close above this critical level could indicate weakening bullish momentum in the near term. However, the fact that the pair remains well above its 50-day EMA suggests the uptrend is still intact, with support likely to emerge around the 1.4000 handle on any pullbacks. A daily close above 1.4170 would open the door for further upside, potentially targeting the 1.4250 region.

The MACD indicator reflects mild bullish momentum, with the MACD line hovering slightly above the signal line and the histogram showing minimal positive growth. This setup suggests that while buyers remain in control, momentum is not overwhelmingly strong. Traders should watch for a breakout confirmation above 1.4170 for renewed bullish confidence or a move below 1.4050 to signal the start of a corrective phase. The broader trend remains constructive as long as the pair stays above the 200-day EMA, but short-term consolidation cannot be ruled out.

USD/CAD daily chart