Photo by Michelle Spollen on Unsplash
 

The USD/CAD pair trades higher around 1.3790 in the early European trading session on Friday. The Loonie pair edges up as the US Dollar (USD) regains ground after being jolted by soft United States (US) Consumer Price Index (CPI) data for November.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades higher to near 98.60.

As measured by the CPI, the US headline inflation surprisingly came in lower at 2.7% year-on-year (YoY) on Thursday from 3% in October. Economists expected the inflation data to come in higher at 3.1%. The so-called core reading, which excludes volatile food and energy items, decelerated to 2.6% from estimates and the prior reading of 3%.

Meanwhile, the Canadian Dollar (CAD) trades cautiously ahead of the Retail Sales data for October, which will be published at 13:30 GMT. The Retail Sales data is expected to have remained flat on a monthly basis after contracting 0.7% in September.

USD/CAD technical analysis
 

USD/CAD trades slightly higher to near 1.3790on Friday. The pair holds beneath a descending 20-day Exponential Moving Average (EMA), keeping the short-term bias tilted lower as bounces remain contained by the average. The EMA’s steady downturn underscores persistent supply on upticks. The 14-day Relative Strength Index (RSI) sits at 35.09, near oversold after a modest bounce from last week’s extremes, while momentum remains fragile.

A sustained recovery would require a daily close above the 20-day EMA to ease downside pressure that could increase the odds of an upside move towards the round-level figure of 1.3900. Until then, the downbeat setup persists and could strengthen if the spot breaks below the August 7 low of 1.3720.

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