• USD/CAD ticks higher to near 1.3750 as the US Dollar trades firmly.
• Investors expect the Fed to avoid reducing interest rates this year.
• Canada’s CPI data for April will be keenly watched later in the day.

The USD/CAD pair trades marginally higher to near 1.3750 during the European trading session on Tuesday. The Loonie pair ticks up as the US Dollar (USD) reflects strength due to firm expectations that the Federal Reserve (Fed) will either hold interest rates at their current levels for longer or raise them this year.

During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.15% higher to near 99.10.

The CME FedWatch tool shows that the possibility of the Fed holding interest rates at their current levels by the year-end is 53%, while the rest favor at least one interest rate hike this year.

Though investors have underpinned the US Dollar against the Canadian Dollar (CAD), the latter outperforms its other peers ahead of Canada’s Consumer Price Index (CPI) data for April, which will be published at 12:30 GMT. The CPI report is expected to show that the headline inflation accelerated to 3.1% Year-on-Year (YoY) from 2.4% in March. Signs of price pressures accelerating would prompt expectations for interest rate hikes by the Bank of Canada in the near term.

USD/CAD technical analysis

USD/CAD trades slightly higher at around 1.3750, holding a mildly bullish near-term bias as it consolidates above the 20-day exponential moving average (EMA) at 1.3701, though struggles to extend its advance above the 50% Fibonacci retracement at 1.3760.

The Relative Strength Index (RSI) at 57 keeps a positive, yet not overbought, tone that hints at persistent upside pressure as long as these supports hold.

On the topside, immediate resistance emerges at the 50.0% Fibo retracement, followed by the 61.8% level at 1.3809, with further barriers at 1.3880 and the recent cycle high around 1.3970. On the downside, initial support is seen around the 20-day EMA at 1.3701 and the 38.2% retracement at 1.3710, with deeper cushions at the 23.6% level at 1.3649 and the swing low zone near 1.3550, where buyers would be expected to defend the broader uptrend.

(The technical analysis of this story was written with the help of an AI tool.)