• The USD/CAD price analysis remains firm above 1.3900, supported by a stronger US dollar and a softer Canadian backdrop.
• US PPI and retail sales data maintain an upside bias for the greenback.
• US unemployment claims and FedSpeak could provide fresh impetus to the markets.

USD/CAD is trading firmly around 1.3900 in the early European session, supported by a firm US dollar and a softer Canadian backdrop. Recent US data have stayed strong, with November retail sales rising 0.6% MoM after a 0.1% dip in October. Meanwhile, producer prices increased 3.0% YoY for both headline and core measures.

Alongside last week’s fall in the US unemployment rate to 4.4% and December CPI holding up, markets see little urgency for the Fed to cut rates, keeping the policy rate in the 3.50%–3.75% range for now and pushing expectations for the first cuts out toward mid-year.

By contrast, Canada’s labor market has softened, with unemployment rising to 6.8% in December from 6.5%, which has encouraged talk of an earlier easing from the Bank of Canada, even as the recent CPI nears 2.9% and rising oil prices provide some underlying support for the loonie.

Broadly, the US Dollar Index trades near monthly highs around 99.00 amid positive yields. Traders await the release of weekly US initial jobless claims and a series of Federal Reserve speeches for confirmation that policymakers are in no rush to loosen policy.

Ongoing tensions in Iran, which have helped lift crude prices, add further uncertainty that limits USD/CAD gains, given Canada’s status as a major oil exporter.

With WTI holding firm and no near-term domestic risk events in Canada, the pair is likely to remain within a broad range, with interest rate expectations and oil prices being the main drivers.
 

USD/CAD Technical Price Analysis: Bullish Above Key MAs
 

(Click on image to enlarge)

USD/CAD 4-hour chart
 

The 4-hour chart for USD/CAD shows the price has recovered steadily from its December lows and is now pressing against resistance in the 1.3890–1.3920 band. Price is trading above the 20? and 50?period MAs, offering nearby support.

The 100? and 200-period MAs lie lower, around 1.3750 to 1.3820, underlining how far the pair has climbed since the late?December trough. Recent candlesticks indicate that the market is holding steady, just below its resistance level. This keeps the focus on whether buyers can push through 1.3920; if they do, the next level of interest is around 1.4000.

Momentum remains constructive but is no longer stretched. The RSI is holding above the midline after easing back from recent highs, showing that upward pressure has cooled.

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