Volatility contracts ahead of Fed Powell’s testimony and sideways oil

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• USD/CAD has turned sideways amid anxiety ahead of Fed Powell’s speech and lackluster oil price.
• BOC might keep interest rates steady as announced earlier.
• The mighty 200-period EMA at 1.3580 is providing support to the US Dollar bulls.

The USD/CAD pair is demonstrating a sideways auction above the round-level resistance of 1.3600 in the Asian session. The Loonie asset has turned sideways ahead of Federal Reserve (Fed) chair Jerome Powell’s testimony and lackluster oil price.

Investors have refrained from going all-in as the commentary from Fed will determine the further direction in the FX domain. The US Dollar Index (DXY) is expected to resume the downside journey toward the critical support of 104.00 amid the risk-on market mood. S&P500 futures have added some gains after a lackluster Monday as the risk appetite of the market participants has improved.

This week, the interest rate decision by the Bank of Canada (BoC) will be the crucial highlight. BoC Governor Tiff Macklem has already announced a pause in the policy-tightening spell as he believes that the current monetary policy is restrictive enough to tame Canada’s sticky inflation.

USD/CAD is auctioning in an Ascending Triangle chart pattern formed on an hourly scale. The horizontal resistance of the aforementioned chart pattern is placed from February 24 high at 1.3665 while the upward-sloping trendline is plotted from February 27 low at 1.3534. An ascending triangle pattern shows a volatility contraction, which is followed by wider ticks and heavy volume after an explosion.

The mighty 200-period Exponential Moving Average (EMA) at 1.3580 is providing support to the US Dollar bulls.

A 40.00-60.00 range oscillation by the Relative Strength Index (RSI) (14) indicates an absence of a potential trigger.

The Loonie asset is expected to add more gains after surpassing February 24 high at 1.3665, which will drive the asset toward the horizontal resistance plotted from December 07 high around 1.3700 followed by November 03 high around 1.3800.

Alternatively, a break below February 6 high at 1.3474 will drag the asset to near January 26 high around 1.3408. A slippage below the same will expose the asset to February 16 low around 1.3357.

USD/CAD hourly chart