USD/CAD Price Analysis: Cushion around 1.3700 looks delicate ahead of Canada CPI and Fed policy

• USD/CAD is expressing volatility contraction ahead of Fed inflation and Canada’s inflation.
• The USD Index has corrected further to 103.65 as the Fed is expected to go light on interest rates.
• A 40.00-60.00 range oscillation by the RSI (14) indicates that investors are awaiting a fresh trigger for further action.

The USD/CAD pair has found a cushion around 1.3700 after a marginal correction in the Asian session. The Loonie asset is showing an expression of volatility contraction as investors are awaiting the release of Canada’s Consumer Price Index (CPI) data and the interest rate decision by the Federal Reserve (Fed), which will release on Tuesday and Wednesday respectively.

The option for an unchanged monetary policy decision by the Federal Reserve (Fed) is gaining the limelight as banking shakedown in the United States has impacted the confidence of investors dramatically.

Meanwhile, the US Dollar Index (DXY) has corrected further to 103.65 as the Fed is expected to go light on interest rates. S&P500 futures have shown a recovery move after a bearish Friday’s settlement, however, investors’ risk appetite for US equities is extremely weak.

On the Canadian Dollar front, investors are awaiting Tuesday’s Canada inflation data. As per the consensus, the headline Consumer Price Index (CPI) is expected to accelerate by 0.4%, lower than the former release of 0.5%. This might drag the annual headline CPI further to 5.5%. Also, the annual core CPI is expected to trim to 4.6% from the former release of 5.0%.

USD/CAD is auctioning in a Symmetrical Triangle chart pattern on an hourly scale, which indicates a sheer volatility contraction followed by an expansion in the same. The downward-sloping trendline of the chart pattern is plotted from March 10 high at 1.3862 while the upward-sloping trendline is placed from March 14 low at 1.3657.

Overlapping 20-period Exponential Moving Average (EMA) at 1.3724 with the asset price indicates a consolidation ahead.

Adding to that, a 40.00-60.00 range oscillation by the Relative Strength Index (RSI) (14) indicates that investors are awaiting a new trigger for further action.

A decisive breakdown of March 14 low at 1.3652 would drag the loonie asset toward March 07 low at 1.3600, followed by March 03 low at 1.3555.

In an alternate scenario, a confident recovery above March 14 high at 1.3773 would drive the major toward March 09 high at 1.3835 and the round-level resistance at 1.3900.

USD/CAD hourly chart