USD/CAD Price Analysis: Downside looks solid to near 1.3400 ahead of Powell/Macklem’s speech

• USD/CAD has gauged an intermediate cushion of around 1.3350.
• Volatility is likely to contract ahead of Powell/Macklem’s speech.
• Downward-sloping 20-and 50-EMAs add to the downside filters.

The USD/CAD pair has shifted its auction profile below the critical resistance of 1.3400 in the early Asian session. The Lonnie asset is displaying a sideways profile after finding an immediate cushion below 1.3400 post carnage led by risk-on market mood. A continuation of rangebound structure is highly expected ahead of the speech from Federal Reserve (Fed) chair Jerome Powell and Bank of Canada (BoC) Governor Tiff Macklem.

The US Dollar Index (DXY) is displaying a subdued performance after a massive sell-off. An absence of follow-up recovery despite gauging an immediate cushion indicates more downside ahead. Meanwhile, a failure in the extension of S&P’s rally resulted in a corrective move, portraying a caution in the risk appetite theme.

After a breakdown of stretched consolidation formed in a range of 1.3482-1.3702 on a four-hour, USD/CAD has dropped dramatically to near 1.3350. The range expansion on the south side is expected to continue further as the overall market sentiment is still positive.

Declining 20-and 50-period Exponential Moving Averages (EMAs) at 1.3482 and 1.3518 respectively, add to the downside filters.

Also, the Relative Strength Index (RSI) (14) has shifted into the bearish range of the 20.00-40.00 range, which indicates that a bearish momentum has been activated.

For further downside, the Canadian Dollar needs to push the Loonie asset below Monday’s low of around 1.3350, which will drag the major towards November 18 low at 1.3300 followed by November 15 low at 1.3226.

On the contrary, a break above December 27 low of around 1.3484 will strengthen the US Dollar and will drive the major towards December 8 low at 1.3561. A breach of the latter will expose the asset for further upside towards January 6 high at 1.3664.

USD/CAD four-hour chart