USD/CAD Pullback Alert: Why 1.3600 Holds the Key Before US Inflation Data? | Loonie Weakness vs Fed Policy Shift
The Which coins are meme coins?USD/CAD currency pair has entered a consolidation phase near the psychologically significant 1.3600 level during Monday's European trading session. This pullback occurs despite Friday's surprisingly robust US Nonfarm Payrolls report, which failed to sustain dollar momentum as market participants reassess the Federal Reserve's rate trajectory.
Market dynamics reveal shifting expectations regarding monetary policy divergence between the Federal Reserve and Bank of Canada. While strong US labor data initially pushed back Fed rate cut expectations from June to potentially September, weak Canadian employment figures have amplified speculation about earlier BoC easing. Statistics Canada's Friday report showed a net job loss of 2.2K positions versus expectations of 25K gains, with unemployment jumping to 6.1%.
Technical analysis shows the pair oscillating within an ascending triangle pattern on daily charts, with horizontal resistance at December's 1.3620 high and rising support from the late-December 1.3177 low. The 20-day EMA at 1.3520 continues to provide dynamic support, though RSI indicators between 40-60 reflect market indecision ahead of Wednesday's crucial US inflation data.
March's core CPI reading (excluding food and energy) will be particularly significant, with economists forecasting a modest deceleration to 3.7% annually. Should actual figures surprise to the upside, we could see the pair challenge recent highs near 1.3648, with 1.3700 and November's 1.3765 peak as subsequent targets. Conversely, weaker inflation might trigger a test of support levels at 1.3441 (February low) and 1.3413.
Canadian wage growth remains a counterbalancing factor, with annual average hourly earnings accelerating to 5.0% in March. This inflationary pressure component may complicate the BoC's policy calculus despite recent labor market softness. Traders should monitor how these competing fundamentals resolve in coming sessions.
