Photo by Michelle Spollen on Unsplash

The USD/CAD pair trades in a tight range near its almost three-week low, slightly below 1.4000, during the early European trading session on Wednesday. The Loonie pair trades cautiously as the Canadian Dollar (CAD) has been outperforming the US Dollar (USD) for the past few weeks on expectations that the Bank of Canada (BoC) will not reduce its borrowing rates further in the near term.

Canadian Dollar Price Last 7 Days
 

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies last 7 days. Canadian Dollar was the strongest against the Japanese Yen.
 

In the October policy meeting, the BoC stated after reducing interest rates by 25 basis points (bps) to 2.25% that the current monetary policy is optimal to keep inflation near the 2% target.

Meanwhile, the US Dollar (USD) struggles to extend the latest recovery move initiated on Friday. The US Dollar is expected to stay on the sidelines as investors await the United States (US) Nonfarm Payrolls (NFP) data for October, which will be released on Thursday.

The impact of the US NFP data will be significant on the US Dollar and the Federal Reserve’s (Fed) monetary policy outlook, as it will be the first economic release since the federal reopening after a 43-day shutdown.

USD/CAD corrects to near the 50-day Exponential Moving Average (EMA), which trades around 1.3968. The overall trend of the pair remains bullish as it trades inside the Rising Channel formation.

The 14-day Relative Strength Index (RSI) falls slightly below 50.00, suggesting an ongoing correction.

Given that the Loonie pair is close to the lower border of the Rising Channel formation, the odds of a recovery move are high. An upside move by the pair above the November 18 high of 1.4062 would open the door towards the April 8 low of 1.4144, followed by the April 9 high of 1.4274.

On the flip side, the asset could slide towards the round level of 1.3600 and the June 16 low of 1.3540 if it extends retracement below the August 7 low of 1.3722.

USD/CAD daily chart
 

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