Despite a welcome decline in Canadian inflation, the USDCAD currency pair failed to gain sustainable upside momentum, as the US dollar remains under pressure in the aftermath of the slowdown in consumer prices from the world’s biggest economy. As the currency pair floats around dynamic support, could the market find buyers, or will the greenback continue to dominate the price action?
In Canada, year-over-year inflation slowed down from 3.4% to 2.8%, a more significant decline than the forecasted 3%. However, core inflation remained sticky, which prevented the possibility of an additional rate hike being taken off the table. Core inflation came in at 3.2%, down from 3.7% and missing the 3.5% consensus to the downside.
On the 4H chart, an ascending triangle has formed, with the dynamic support holding firm after the upside was corrected in the Tuesday session. The daily pivot resistance at 1.3191 presents a challenging hurdle to the upward momentum, leaving the triangle vulnerable to a breakdown.
A breakdown could result in a test of support at 1.3155, but confirmation of the sustainability could require an additional leg lower toward 1.3141 (S1). From there, the downside momentum could continue toward neckline support at 1.3119 in an attempt to find buyers.
However, if the dynamic support at the lower end of the triangle prevents additional downward momentum, the currency pair could attempt a test of the pivot resistance at 1.3191. If the greenback corrects from its recent slump in upcoming sessions, the currency pair could extend the upward momentum to test the triangle resistance at 1.3232, where a breakout could lead the price action toward 1.3258 and 1.3286.
With little upward momentum generated from the slowdown in Canadian inflation, the US dollar continues to drive the price action of the Loonie. If the greenback does not find support in the upcoming session, the triangle could be vulnerable to a breakdown toward 1.3155 and 1.3141. Alternatively, if the triangle support holds, the pivot point at 1.3191 could come under pressure.
Sources: Koyfin, Tradingview
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