USD/CAD Price Forecast: Stabilizes above 20-day EMA around 1.3770

• USD/CAD ticks up to near 1.3770, with investors shifting their focus to the US CPI data for July.
• Economists expect the US inflation to have grown at a faster pace.
• Soft Canadian labor market data paves the way for more BoC interest rate cuts.

The USD/CAD pair trades marginally higher around 1.3770 during the European trading session on Monday. The Loonie pair ticks up, while the US Dollar (USD) trades sideways, with investors awaiting the announcement of the United States (US) Consumer Price Index (CPI) data for July, which will be published on Tuesday.

The US CPI report is expected to show that headline and the core inflation - which excludes volatile food and energy prices - rose at a faster pace of 2.8% and 3.0% on year, respectively.

Investors will closely monitor prices of goods that are largely imported into the US to know whether the impact of tariffs on inflation is one-time or persistent.

Currently, traders have fully priced in a 25 basis point (bps) interest rate reduction by the Federal Reserve (Fed) in the September policy meeting.

Meanwhile, the Canadian Dollar (CAD) faces pressure as cooling labor market conditions have increased the hopes of more interest rate cuts by the Bank of Canada (BoC) in the remainder of the year. The labor market data showed on Friday that the laborforce saw a reduction in the number of payrolls by 40.8K, while economists anticipated a fresh addition of 13.5K.

USD/CAD trades above the 20-day Exponential Moving Average (EMA), which is around 1.3740. The 14-day Relative Strength Index (RSI) oscillates around 50.00, indicating a sideways trend.

Going forward, an upside move by the pair above the August 1 high of 1.3880 would open the door towards the May 15 high of 1.4000, followed by the April 9 low of 1.4075.

On the contrary, the asset could slide towards the psychological level of 1.3500 and the September 25 low of 1.3420 if it breaks below the June 16 low of 1.3540.

USD/CAD daily chart