Current trend

The USD/CAD pair is showing an upward trend, developing a strong "bullish" trend formed in the short/medium term. The instrument is testing 1.3815 for a breakout, updating local highs from August 6, despite the fact that trading platforms in the US and Canada were closed on Monday due to national holidays, and market activity remained low.

The American currency is supported by weakening expectations of a rapid reduction in borrowing costs by the US Federal Reserve against the backdrop of macroeconomic data published last week. The Consumer Price Index in September slowed from 2.5% to 2.4% against the forecast of 2.3%, and the Core CPI rose from 3.2% to 3.3% year-on-year and remained at the same level of 0.3% month-on-month, contrary to expectations of 0.2%. In turn, the Producer Price Index slowed from 1.9% to 1.8%, while analysts expected 1.6%, and the Core PPI accelerated from 2.6% to 2.8% with preliminary estimates of 2.7%. Higher inflation in the US has led to a revision of the November interest rate cut forecasts, with the probability of a –25-basis-point adjustment falling to 80.0% from 90.0%, according to the Chicago Mercantile Exchange (CME Group) FedWatch Tool.

The Canadian currency is supported by the September labor market report, which was published at the end of last week: Net Change in Employment increased sharply from 22.1 thousand to 46.7 thousand, while experts expected 27.0 thousand, the Unemployment Rate fell from 6.6% to 6.5% with preliminary estimates of 6.7%, and Participation Rate adjusted from 65.1% to 64.9%.

Today at 14:30 (GMT 2), Canada will release September inflation data: the Consumer Price Index is expected to slow from 2.0% to 1.8% year-on-year and fall by another 0.2% month-on-month, while the Core CPI could settle at 1.5% or even lower, which will open up new opportunities for the Bank of Canada to ease monetary policy.

Support and resistance

Bollinger Bands on the daily chart show a steady increase. The price range is expanding, barely keeping up with the development of a "bullish" trend in the short term. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic has been near its highs for a long time, indicating the risks of the US dollar being overbought in the ultra-short term.

Resistance levels: 1.3830, 1.3864, 1.3900, 1.3950.

Support levels: 1.3800, 1.3765, 1.3730, 1.3700.

Trading tips

Long positions can be opened after a breakout of 1.3830 with the target of 1.3900. Stop-loss — 1.3800. Implementation time: 1-2 days.

A rebound from 1.3830 as from resistance, followed by a breakdown of 1.3800 may become a signal for opening of new short positions with the target at 1.3730. Stop-loss — 1.3830.