USD/CAD is looking vulnerable above the immediate support of 1.3160 amid weakness in the US Dollar.
The recovery move in the USD Index seems fragile due to an absence of supportive fundamentals.
USD/CAD is expected to continue its downside journey toward the horizontal support at 1.3077.
The USD/CAD pair is struggling in maintaining an auction above 1.3150 in the early European session. The Loonie asset is failing to pick strength as the upside in the US Dollar Index (DXY) seems restricted due to easing inflationary pressures in the United States economy.
The recovery move in the USD Index seems fragile due to an absence of supportive fundamentals. The fight against United States inflation by the Federal Reserve (Fed) is still on and the central bank is ready to raise interest rates further. Also, US retail demand is not at its best as households have postponed demand for big-ticket items to fulfill basic needs.
Meanwhile, there is some strength in the Canadian Dollar despite inflationary pressure in Canada has eased further. June’s core Consumer Price Index (CPI) reported monthly disinflation by 0.1% against expectations of 0.5%. This would allow the Bank of Canada (BoC) to keep interest rates steady ahead.
USD/CAD has faced selling pressure to near the 20-period daily Exponential Moving Average (EMA) at 1.3230 after attempting a recovery move from around 1.3100. The Loonie asset is expected to continue its downside journey towards the horizontal support plotted from 12 May 2022 high at 1.3077.
The Relative Strength Index (RSI) (14) is on the edge of 40.00. A slippage below the same would trigger the downside momentum.
Should the asset break below June 27 low at 1.3117, Canadian Dollar bulls would drag the asset towards 12 May 2022 high at 1.3077, followed by the psychological support at 1.3000.
In an alternate scenario, a confident recovery above June 28 high at 1.3277 would drive the asset toward June 15 high at 1.3355 and July 7 high at 1.3387
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