USD/CAD Price Forecast: Bulls turn cautious ahead of US CPI report and BoC decision

• USD/CAD pulls back from a multi-year top, though the downside seems limited.
• Rising oil prices underpins the Loonie and exert pressure on the currency pair.
• The technical setup supports prospects for the emergence of some dip-buyers.

The USD/CAD pair edges lower during the Asian session on Wednesday, though it lacks follow-through and remains close to the highest level since April 2020 touched the previous day. Spot prices currently trade just above mid-1.4100s, down less than 0.10% for the day, as traders keenly await the US consumer inflation figures and the Bank of Canada (BoC) policy decision before placing fresh directional bets.

In the meantime, rising Crude Oil prices seem to underpin the commodity-linked Loonie and exert some pressure on the USD/CAD pair. That said, bets for a larger BoC rate cut might hold back traders from placing aggressive bullish bets around the Canadian Dollar (CAD). Furthermore, the growing market conviction that the Federal Reserve (Fed) will adopt a cautious stance on cutting interest rates assists the US Dollar (USD) in preserving its gains registered over the past three days and acts as a tailwind for the currency pair. 

From a technical perspective, the recent sustained breakout and acceptance above the 1.4100 mark was seen as a key trigger for bullish traders. Moreover, oscillators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone, suggesting that the path of least resistance for the USD/CAD pair remains to the upside. Hence, any further slide might still be seen as a buying opportunity and remain limited near the aforementioned handle, which should now act as a pivotal point.

Some follow-through selling, leading to weakness below the 1.4070 support zone, might prompt some long-unwinding trade and drag the USD/CAD pair to the 1.4020 area en route to the 1.4000 psychological mark. The corrective pullback could extend further towards the next relevant support near the 1.3960-1.3950 area en route to the November 25 low, around the 1.3925 region. 

On the flip side, the 1.4200 mark might continue to act as an immediate barrier, above which the USD/CAD pair could surpass an intermediate hurdle near the 1.4260 area and test the April 2020 swing high, around the 1.4300 round figure. Spot prices could eventually climb to the 1.4335-1.4340 region.

USD/CAD daily chart