The US Dollar (USD) extended upside movement against the Canadian Dollar (CAD) on Tuesday, increasing the price of USD/CAD to more than 1.0740 ahead of US inflation report. The sentiment remains bearish due to Lower Low and Lower High in the recent wave.
As of this writing, the pair is being traded near 1.0743. A hurdle may be noted around 1.0791, the 50% fib level ahead of 1.0820-35 which is the confluence of 200 Simple Moving Average (SMA) and 61.8% fib level as demonstrated in the following chart. A break and daily closing above the 1.0820-35 resistance area could spur a renewed buying interest, validating a fresh rally above the 1.0900 handle.
On the downside, the pair is expected to find a support around 1.0700 handle, the 23.6% fib level and psychological number ahead of 1.0620, the swing low of the recent correction wave. The sentiment will remain bearish as far as the 1.0794 resistance area is intact.
US Consumer Price Index
The US Bureau of Labor Statistics will release the Consumer Price Index (CPI) report today in the American session. According to the median projection of different economists, the CPI—a main yardstick for inflation—remained stable at 2.1% in June as compared to the same reading in the same duration of the year before. However, the CPI ticked up by 0.4% last month as compared to 0.3% in the month before. Generally speaking, higher CPI figures are considered positive for the economy, thus better than expected actual readings will be seen as bullish for USD/CAD and vice versa.
Keeping in view the overall technical and fundamental outlook, buying the pair on dips appears to be a good strategy, the trade should however be stopped out on a daily closing below the 1.0620 support area.