USD/CAD price edges higher as traders await Canadian CPI inflation data
USD/CAD holds near 1.4205 ahead of key Canadian inflation report
The USD/CAD pair remains in positive territory near 1.4205 during Tuesday’s European session, supported by a stronger U.S. dollar. Investors are focusing on the upcoming Canadian Consumer Price Index (CPI) inflation data for January, which could influence Bank of Canada (BoC) rate expectations.
The CPI report is expected to show a 1.8% year-over-year increase, with a modest 0.1% rise on a monthly basis, following a 0.4% decline in December.
USD/CAD price analysis (Dec 2024 - Feb 2025) Source: TradingView.
Bearish bias remains intact below $1.4265
From a technical perspective, USD/CAD continues to trade below the key 100-period Exponential Moving Average (EMA), reinforcing a bearish outlook. The Relative Strength Index (RSI) at 46.25 remains in negative territory, suggesting further downside potential.
Key support levels include 1.4151, the February 14 low, followed by 1.413, which aligns with the lower Bollinger Band. A further drop could push the pair toward the 1.41 psychological level, reinforcing downward pressure. On the upside, the first major resistance is seen at 1.4265, with a breakout potentially driving the pair toward the 100-period EMA at 1.431. If bullish momentum continues, 1.4380 (February 10 high) could act as the next key barrier.
Canadian dollar strengthens despite tariff concerns
The Canadian dollar (CAD) strengthened past 1.43 per USD, marking a near two-month high, as the Bank of Canada softened its dovish stance. The latest BoC minutes revealed policymakers' concerns over U.S. tariff uncertainty, which could weigh on business investment and inflation expectations. The loonie has also gained support from a strong labor market, with unemployment falling to 6.6% in January, easing pressure for immediate BoC rate cuts.
Despite this, risks remain as U.S. President Donald Trump’s new 25% tariffs on steel and aluminum, along with reciprocal tariffs, could escalate trade tensions. However, a temporary exemption secured by Prime Minister Justin Trudeau has helped stabilize CAD sentiment, providing room for further negotiations.
Market outlook: Eyes on inflation and BoC policy stance
The USD/CAD pair remains under technical pressure, with a bearish bias persisting below 1.4265. The Canadian CPI report will be pivotal in shaping BoC rate expectations, with a weaker-than-expected reading likely to increase speculation of rate cuts, potentially weighing on the loonie. However, strong CPI data could support the BoC’s cautious stance, strengthening the CAD further.
In our previous coverage, we highlighted the Canadian dollar's resilience amid BoC’s policy shifts and U.S. tariff concerns. As the CPI report nears, traders are monitoring inflation trends and USD strength for the next directional move.
