• The USD/CAD outlook points to dollar strength ahead of the US consumer inflation report.
• Market participants are eagerly awaiting the US CPI report.
• Data on Wednesday revealed that US wholesale inflation eased by 0.1%.

The USD/CAD outlook points to dollar strength ahead of the US consumer inflation report. The dollar regained some of its shine this week amid geopolitical tensions. However, Fed rate cut expectations rose after a poor wholesale inflation report.

The dollar was on the front foot on Thursday as market participants eagerly awaited the US CPI report. Moreover, it was holding onto gains made in the previous session after reports of tensions in Ukraine and the Middle East. Traders sought safety in the greenback after reports of Russia’s drones being shot down in Poland.

Meanwhile, the upcoming CPI report will shape the outlook for Fed rate cuts. Economists predict an acceleration in price pressures. However, traders are pretty confident in a rate cut this month. The only thing that might change is the size and pace of future rate cuts.

Data on Wednesday revealed that US wholesale inflation eased by 0.1%. This was a softer figure than expected, and it solidified bets for a Fed rate cut.

On the other hand, the Canadian dollar was pressured by a decline in oil amid demand concerns. Crude inventories unexpectedly rose last week, pointing to weak demand.
 

USD/CAD key events today

• US core CPI m/m
• US CPI m/m
• US CPI y/y
• US unemployment claims
   

USD/CAD technical outlook: Higher high after 1.3850 resistance break
 

(Click on image to enlarge)

USD/CAD 4-hour chart
 

On the technical side, the USD/CAD price is rallying and trades well above the 30-SMA. At the same time, the RSI trades near the overbought region, indicating solid bullish momentum. The price has made a sharp swing from the 30-SMA, which has broken above the 1.3850 key resistance level.

Previously, USD/CAD had struggled to break past the 1.3850 resistance. As a result, bears emerged to test the rally by puncturing the 30-SMA. However, bulls kept the price mostly above the SMA and gained enough momentum to break the resistance.

Consequently, the price has made a higher high, continuing the bullish trend. The next resistance lies at the 1.3920 level. Here, the rally could pause to allow bulls to catch their breath before it continues higher. Moreover, a pause would allow the SMA to catch up.

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