In Monday’s European trading, the USD/CAD pair declined to 1.3730. The Canadian Dollar exhibited strength as the US Dollar hovered within a confined range, with the US Dollar Index (DXY) remaining flat near a six-month peak of around 106.00.

The Canadian Dollar benefits from anticipations that the Federal Reserve will maintain higher interest rates for an extended period. Fed officials are not rushing to cut rates due to ongoing high consumer price inflation, reinforcing a restrictive monetary stance.

Attention is also turning to the forthcoming U.S. Retail Sales data for March, a key indicator that could influence Federal Reserve policy decisions. Analysts predict a moderation in retail sales growth to 0.3%, down from 0.6% previously.

Robust retail sales figures could reinforce concerns about sustained inflation, potentially delaying expected Fed rate cuts, presently forecasted for September.

On the Canadian front, the focus shifts to the release of the Consumer Price Index (CPI) data for March, scheduled for Tuesday. This inflation report will be crucial in shaping expectations around the timing of interest rate reductions by the Bank of Canada (BoC).

USD/CAD Technical Outlook

The USD/CAD pair is currently experiencing a downtrend, as evidenced by today’s 0.21% decline, bringing the price to 1.37416.

Despite the day’s slip, the pair finds itself just below a critical pivot point at 1.3779. If it manages to break above this threshold, it could face upward pressure with immediate resistance observed at 1.3836, followed by further resistance points at 1.3891 and 1.3941.

Conversely, should the USD/CAD fail to reclaim the pivot level, the potential for a deeper retracement emerges with support levels positioned at 1.3694, 1.3630, and the more significant 1.3557, which could halt further declines.

The current Relative Strength Index (RSI) reading at 64 suggests a leaning towards overbought territory, which may prompt a corrective pullback.

The technical setup indicates a bearish bias below 1.3779, with substantial room for downward movement if the pair cannot sustain above this pivotal mark. The 50-day Exponential Moving Average (EMA) at 1.3620 supports the potential for a bearish continuation if the pivot point continues to cap upward attempts.