The USD/CAD pair is trading sideways near 1.3600 as investors focus on US inflation data. The core CPI is expected to show steady growth of 3.4% on both monthly and annual basis. Meanwhile, concerns over the Canadian labor market are increasing the likelihood of rate cuts by the Bank of Canada.
The USD/CAD pair has been trading in a narrow range between 1.3600 and 1.3780 for over two months, with lower volume and small ticks indicating volatility contraction. The asset is currently below the 20-day Exponential Moving Average (EMA), suggesting a bearish outlook in the near term.
Market participants are indecisive, as indicated by the 14-period Relative Strength Index (RSI) oscillating in the 40.00-60.00 range. A breakdown below the support level of 1.3600 could lead to further downside towards 1.3547 and 1.3500. On the other hand, a breakout above 1.3800 could provide a buying opportunity, targeting levels above 1.3838 and 1.3900.
The upcoming US Consumer Price Index (CPI) report will be crucial in determining market sentiment, with expectations of a possible interest rate cut by the Federal Reserve. Meanwhile, speculation of rate cuts by the Bank of Canada continues to weigh on the Canadian Dollar.