As we move through the latter half of the week, markets are bracing for several high-impact economic releases that could influence volatility across GBP and USD pairs. Later today, the focus will be on the UK’s monthly GDP data, along with key U.S. figures, including Producer Price Index (PPI) and unemployment claims. On Friday, attention turns to preliminary readings of U.S. consumer sentiment and inflation expectations from the University of Michigan.
Amid these developments, USDCAD remains under pressure, with both fundamental and technical factors contributing to its recent decline.
Following its peak at 1.47920 on February 3, USDCAD has declined by over 6% at the time of writing, under pressure from a combination of fundamental developments and technical factors.
From a technical standpoint, the pair is trading below both the 20- and 50-period Exponential Moving Averages (EMAs), reinforcing a prevailing bearish bias. Momentum indicators continue to support this view: the Momentum Oscillator remains below the 100 mark, signaling persistent downside pressure, while the Relative Strength Index (RSI) is holding below the neutral 50 level, indicating sustained selling interest.
Nonetheless, the emergence of a bullish divergence between the price and the Momentum Oscillator warrants attention. This divergence may suggest the potential for a pause in the current downtrend or a corrective rebound in the near term.
Key Resistance Levels
Should the bulls take market control, traders may direct their attention toward the four potential resistance levels below:
1.36853: The initial resistance level is set at 1.36853, which mirrors the swing low marked May 26.
1.38607: The second price target is identified at 1.38607, representing the swing high from May 29.
1.40154: The third price objective is determined at 1.40154, which corresponds with the daily high formed on May 13.
1.42379: An additional price target is established at 1.42379, representing the low point marked on March 6.
Key Support Levels
Should the bears maintain market control, traders may consider the four potential support levels listed below:
1.35769: The initial support level is seen at 1.35769, corresponding to the 161.8% Fibonacci Extension drawn from the low point, 1.36853, to the high point, 1.38607.
1.35254: The second support level is estimated at 1.35254, representing the weekly support, S3, estimated using the standard Pivot Points methodology.
1.34015: The third support level is identified at 1.34015, reflecting the 261.8% Fibonacci Extension drawn from the low point, 1.36853, to the high point, 1.38607.
1.31177: An additional downside target is 1.31177, mirroring the 423.6% Fibonacci Extension drawn from the low point, 1.36853, to the high point, 1.38607.
Fundamentals
In May, the Consumer Price Index (CPI) for All Urban Consumers rose 0.1% on a seasonally adjusted basis, a slight deceleration from April’s 0.2% increase. On a year-over-year basis, headline inflation edged up to 2.4% from 2.3% in April.
Shelter was the primary driver of the monthly increase, rising 0.3%, while food prices also rose 0.3%, with gains seen both at home and away from home. In contrast, energy prices fell 1.0%, led by a decline in gasoline.
Core CPI, which excludes food and energy, also rose 0.1% in May. Notable increases were seen in medical care, motor vehicle insurance, household furnishings, and education. Meanwhile, prices for airline fares, vehicles, and apparel declined.
Over the past 12 months, core inflation stands at 2.8%. Food prices rose 2.9% year over year, while energy prices fell 3.5%.
Conclusion
With key economic data still ahead, including U.S. PPI, unemployment claims, and consumer sentiment figures, market participants should remain alert to potential shifts in volatility—particularly in USD-sensitive pairs like USDCAD. The pair remains technically weak, but the presence of a bullish divergence suggests the possibility of a near-term rebound. As fundamental pressures and technical signals continue to evolve, traders should closely monitor key levels and upcoming data releases to assess directional momentum and manage risk accordingly.
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