USD/CAD Stabilizes Near 1.3770 Ahead of Key US CPI Data

USD/CAD Holds Near 1.3770 as Markets Await US Inflation Figures

The USD/CAD currency pair is trading slightly higher near 1.3770 during Monday’s European session, finding support at its 20-day Exponential Moving Average (EMA). With investors in wait-and-see mode ahead of Tuesday’s highly anticipated US Consumer Price Index (CPI) report for July, price action remains relatively subdued, though with a slight bullish tilt.

US Inflation Expected to Accelerate in July

Market participants are focused on whether inflation in the United States reaccelerated in July. Economists are forecasting a year-on-year increase of 2.8% for headline CPI and 3.0% for core CPI (which excludes food and energy). A hotter-than-expected reading could fuel expectations of fewer rate cuts by the Federal Reserve this year, which would likely lend strength to the US Dollar.

An important focus will also be on goods prices, particularly those affected by US import tariffs. Analysts are closely watching to see if tariffs are having a transitory or sustained impact on inflationary pressures. A persistent increase in goods prices could complicate the Fed’s path forward and drive further movement in the USD/CAD pair.

Canadian Dollar Faces Pressure from Weak Labor Data

Meanwhile, the Canadian Dollar remains on the back foot following disappointing Canadian jobs data. The labor market weakness has strengthened expectations that the Bank of Canada (BoC) could initiate more interest rate cuts in the coming months.

This divergence in economic performance between the US and Canada is helping to support the USD/CAD pair above the 1.3750 region. Should US CPI data come in hotter than forecasted, the pair could see a renewed push toward the 1.3800 resistance level.

Outlook: Key Data Could Trigger Breakout

While USD/CAD is currently consolidating, volatility is likely to increase after Tuesday’s CPI release. A significant surprise in the inflation data could alter Fed expectations and drive directional momentum. For now, 1.3770 acts as a key pivot level, with short-term support around 1.3725, and resistance seen near 1.3800–1.3820.