FxWirePro: USD/CAD runs out of steam but maintains bullish outlook

• USD/CAD edged higher on Tuesday   investors awaited key central bank decisions this ‌week for clues on the monetary policy outlook in Canada and the U.S. as tensions in the Middle East raged on.

• The Bank of Canada is widely expected to keep policy unchanged, shifting the spotlight squarely onto the statement and forward guidance.

•  Headline inflation is hovering near cycle lows at 1.8%, while the Bank of Canada’s preferred core indicators   the 3-month annualised trimmed and median CPI   are running in a subdued range of 0.7–1.3%. This suggests underlying price pressures remain well contained.

• On the currency, CAD has held up reasonably well, with its low beta to a strong USD and terms of trade status   net energy exporter   having both provided a buffer. However, the cracks may be emerging.

• Domestic data is showing signs of softening, and with the upcoming renegotiation of the United States–Mexico–Canada Agreement later in the year, the external trade environment is likely to act as a headwind to growth..

•  Immediate resistance is located at 1.3719(50%fib), any close above will push the pair towards 1.3770(Higher BB).

• Support is seen at 1.3665 (SMA 20) and break below could take the pair towards 1.3623 (61.8%fib).

Recommendation: Good to buy around 1.3670, with stop loss of 1.3600 and target price of 1.3750