USD/CAD PRICE ANALYSIS: GAUGES CUSHION AROUND 1.3700 AS USD INDEX EYES MORE GAINS

USD/CAD is gauging an intermediate cushion near 1.3700 as USD Index looks firm.

A recovery in retail demand could force the BoC to resume hiking rates again.

The upside bias for the loonie asset is still solid as it is holding auction above the downward-sloping trendline from 1.3862.

The USD/CAD pair is looking for an intermediate cushion around 1.3700 in the early Tokyo session. The Loonie asset is juggling in a narrow range below 1.3740 following the footprints of the US Dollar index (DXY). The major slipped firmly on late Friday after the release of a jump in the Canadian Retail Sales data.

Monthly Canadian Retail Sales (Feb) jumped to 1.4%, higher than the consensus of 0.7%, and a flat performance was observed earlier. A recovery in retail demand could force the Bank of Canada (BoC) to resume hiking rates again.

The US Dollar Index (DXY) extended its recovery above 103.00 after S&P Global reported upbeat preliminary PMI (March) data. Manufacturing and Services PMI recovered to 49.3 and 53.8 respectively. Although a figure below 50.0 is still considered as a contraction for an economic indicator.

On an hourly scale, USD/CAD has corrected to near the demand zone placed in a narrow range of 1.3737-1.3746. The upside bias for the loonie asset is still solid as it is holding auction above the downward-sloping trendline plotted from March 10 high at 1.3862.

Also, the major is still above the 50-period Exponential Moving Average (EMA) at 1.3727, which indicates that the short-term upside bias has not faded yet.

The Relative Strength Index (RSI) (14) has slipped below 60.00 but is likely to find support around 40.00 initially.

A confident recovery above March 14 high at 1.3773 would drive the major toward March 09 high at 1.3835 and the round-level resistance at 1.3900.

In an alternate scenario, a decisive breakdown of March 14 low at 1.3652 would drag the loonie asset toward March 07 low at 1.3600, followed by March 03 low at 1.3555.