USD/CAD Price Forecast: Trades cautiously near 1.4350 as Fed policy takes centre stage

• USD/CAD seems vulnerable near 1.4350 as the US Dollar trades lower ahead of Fed's policy on Wednesday.
• The Fed is almost certain to keep interest rates steady in the range of 4.25%-4.50%.
• Investors await the US Retail Sales and the Canadian CPI data for February.

The USD/CAD pair struggles to gain ground near the three-day low of 1.4360 in European trading hours on Monday. The Loonie pair trades with caution as the US Dollar (USD) faces selling pressure ahead of the Federal Reserve's (Fed) monetary policy decision Wednesday. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trades lower to near 103.55.

Investors expect the Fed to keep interest rates steady in the range of 4.25%-4.50% for the second time in a row. Fed officials have been guiding that borrowing rates should remain at their current levels until they get clarity over new economic policies from US President Donald Trump.

In today's session, investors will focus on the US Retail Sales data for February, which will be published at 12:30 GMT. Monthly Retail Sales data, a key measure of consumer spending, is estimated to have grown by 0.75 after contracting 0.9% in January.

Meanwhile, the Canadian Dollar (CAD) will be influenced by the Consumer Price Index (CPI) data for February, which will be published on Tuesday. The headline CPI is estimated to have grown by 2.1% in 12 months to February, faster than the 1.9% increase seen in January. An acceleration in price pressures will reduce risks of inflation remaining persistently lower.

USD/CAD holds above the 100-period Exponential Moving Average (EMA), which is around 1.4220, suggesting that the overall trend is bullish.

The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting a sideways trend.

Going forward, an upside move above the March 10 high of 1.4470 will open the door toward the psychological resistance of 1.4500 and the January 30 high of 1.4595.

On the contrary, a breakdown below the February 14 low of 1.4151 by the pair would expose it to the December 9 low of 1.4094, followed by the December 6 low of 1.4020.

USD/CAD daily chart