Attempts to come out of woods

• USD/CAD rebounds after building a base around 1.3400 as the market mood turns cautious.
• US headline inflation for July is expected to rebound as oil prices recovered sharply last month.
• USD/CAD shifts auction above the 1.3387 resistance, which turns into a support for the US Dollar bulls.

The USD/CAD pair attempts to break the consolidation above the round-level support of 1.3400 in the European session. The Loonie asset finds strength as the US Dollar rebounds after discovering a cushion near 102.30.

Bearish sentiment revives as investors turn cautious ahead of the United States inflation data, which will be released on Thursday at 12:30 GMT. US headline inflation for July is expected to rebound as oil prices recovered sharply last month.

July’s inflation data is expected to build a base for Federal Reserve’s (Fed) September monetary policy as sticky price pressures would force policymakers to consider an extension of policy-tightening.

USD/CAD shifts auction above the horizontal resistance plotted from July 07 high at 1.3387 on a four-hour scale, which turns into a support for the US Dollar bulls. The Loonie asset is approaching the next resistance plotted around 1.3650. Upward-sloping 20-period Exponential Moving Average (EMA) at 1.3400 provides support to the US Dollar.

The Relative Strength Index (RSI) (14) oscillates in a 40.00-60.00 range, which indicates a consolidation ahead.

Mean-reversion move to near 1.3400 would be a buying opportunity for the US Dollar bulls. This would drive the asset toward June 05 high at 1.3462 followed by the psychological resistance at 1.3500.

In an alternate scenario, a downside move below July 18 high at 1.3288 would drag the asset toward July 27 low around 1.3160 and July 14 low marginally below 1.3100.

USD/CAD four-hour chart