The USD/CAD pair is trading modestly higher near the 1.3790 area during early European hours on Friday, as the US Dollar (USD) attempts to regain traction following losses triggered by softer-than-expected US inflation data for November. Despite the rebound, upside momentum remains limited, keeping the pair confined below the key 1.3800 handle.
At the time of writing, the US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is edging higher toward the 98.60 region. The dollar found some support after an initial sell-off sparked by the latest US Consumer Price Index (CPI) figures.
Data released on Thursday showed that headline US CPI eased to 2.7% year-on-year in November, down from 3.0% in October and well below market expectations of 3.1%. Core inflation, which excludes food and energy prices, also slowed to 2.6%, undershooting both forecasts and the previous reading of 3.0%. The weaker inflation print has reinforced expectations that the Federal Reserve may adopt a more accommodative stance in the coming months.
On the Canadian side, the Loonie is trading cautiously as investors await the release of Canada’s Retail Sales data for October, scheduled for 13:30 GMT. Markets expect retail activity to remain flat on a monthly basis after contracting by 0.7% in September, a release that could inject fresh volatility into USD/CAD.
USD/CAD technical outlook
From a technical perspective, USD/CAD remains under pressure despite the mild uptick. The pair continues to trade below the declining 20-day Exponential Moving Average (EMA), suggesting that the short-term bias remains tilted to the downside, with rallies capped by ongoing selling interest. The downward slope of the EMA highlights persistent supply on rebounds.
The 14-day Relative Strength Index (RSI) is currently hovering around 35, signaling weak momentum despite a modest recovery from near-oversold conditions seen earlier this week. This setup points to fragile upside potential in the near term.
A clearer recovery signal would require a daily close above the 20-day EMA, which could open the door for a move toward the psychological 1.3900 level. Until such a breakout materializes, the broader bearish structure remains intact, with downside risks increasing if the pair slips below the August 7 low at 1.3720.
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