The USD/CAD pair retreated to the 1.3600 support level early Monday as the US Dollar remains subdued despite diminished expectations for a June Federal Reserve (Fed) rate cut. The Loonie (CAD) weakens as the strong US job market strengthens the inflation outlook, reducing the likelihood of near-term interest rate cuts.

US Inflation Data: Key for USD/CAD Outlook

Wednesday’s release of the US Consumer Price Index (CPI) for March holds significant sway over USD/CAD direction. Annual core CPI (excluding volatile food and energy prices) is forecast to have slowed slightly to 3.7% from February’s 3.8%.

BoC Rate Cuts Loom as Canadian Jobs Data Disappoints

In contrast, Friday’s weak Canadian labor market data has fueled expectations for an earlier Bank of Canada (BoC) rate cut. Disappointing figures showed a 2.2K job loss against expectations of 25K new hires, along with a rise in the Unemployment Rate to 6.1%. However, Average Hourly Earnings growth increased to 5.0%, hinting at wage pressures.

Technical Analysis: Ascending Triangle Pattern in Play

USD/CAD hovers near the horizontal resistance of an Ascending Triangle formation on the daily timeframe. This pattern, characterized by volatility contraction, can break out in either direction. The upward-sloping support line and the 20-day Exponential Moving Average (EMA) near 1.3520 provide an upside bias.

Key Support/Resistance Levels

A decisive break above April 5th’s high of 1.3648 could propel USD/CAD towards the psychological 1.3700 mark, followed by November 22nd’s high of 1.3765. On the downside, a break below February 22nd’s low of 1.3441 would expose the pair to potential further decline towards 1.3413 (February 9th low) and possibly 1.3382 (January 15th low).