Canadian Dollar nudged higher as USD softens in calm Monday session

• Canadian Dollar picks up with the USD losing ground in a risk-on session.
• Investors are looking for the sidelines ahead of Wednesday’s US CPI and BoC rate decision.
• USD/CAD keeps its positive trend intact with CAD recovery attempts limited.

The Canadian Dollar (CAD) is trading moderately higher on Monday, extending the rebound from the year-to-date lows after Friday’s upbeat Ivey PMI offset the negative impact of upbeat US Nonfarm Payrolls. A modest appetite for risk on a very calm weekly opening is allowing some US Dollar pullback, ahead of key macroeconomic data this week.

The US economy created far more jobs than expected in March, while wage growth moderated, although it is still at levels inconsistent with the Federal Reserve’s (Fed) 2% core inflation target for price stability. Last week, Fed officials hinted at a hawkish demeanor on the back of the recent data, which is expected to keep the US Dollar’s downside attempts limited.

Investors, however, are looking for the sidelines on Monday, awaiting the US CPI figures on Wednesday to check whether the recent uptick on inflation is an exception or a structural trend. Also on Wednesday, the Bank of Canada (B0C) will release its monetary policy decision. There is a minor risk of an unexpected rate cut that would send the CAD tumbling.

Daily digest market movers: USD/CAD ticks up in a quiet market

• The Canadian Dollar barely moves on Monday, still paring some losses after having hit four-month lows on Friday.
   
• The highlight of the week is the US CPI due on Wednesday. US headline inflation is expected to have increased 0.3% and 3.4% from a 0.4% monthly increment and a 3.2% year-on-year reading in February.
   
• The core CPI is seen easing to 0.3% in March, from 0.4% in February, with the yearly rate cooling to 3.7% from 3.8%.
   
• Also on Wednesday, the BoC is expected to leave its benchmark index unchanged at 5%. The main interest will be on any hints toward the timing of the first rate cut.
   
• On Friday, US Nonfarm Payrolls increased by 303K in March from 270K in February, well above the 200K forecasted by market experts.
   
• Average Hourly Earnings increased at a 0.3% monthly pace and 4.1% YoY from 0.2% and 4.3%, respectively, in February.
   
• Canadian Ivey Purchasing Managers Index has improved to 57.7, its best reading over the last 12 months, from 53.9 in February.
   

The pair has a support area at 1.3555, where the confluence of the 4-hour 50 and 100 SMAs are likely to hold bears off. Below here, the next targets are at 1.3485 and 1.3420. Resistances are at the mentioned 1.3645 and 1.3680.

USD/CAD 4-Hour Chart