- The USD/CAD price analysis shows a drop in volatility after recent global trade developments.
- The risk of a recession might push the Fed to cut interest rates.
- Canada will release crucial inflation figures today.
The USD/CAD price analysis shows a drop in volatility as calm returns to markets after recent global trade developments. The dollar paused its decline after Trump exempted some imports from the recent tariffs. Meanwhile, the Canadian dollar held near recent peaks as market participants awaited crucial inflation figures from Canada.
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The turmoil and volatility that affected most global markets eased further on Tuesday. Traders have paused to reflect on the implications of Trump’s tariffs. Policymakers on Monday noted that the risk of a recession might push the Fed to cut interest rates despite high inflation.
The dollar paused its recent collapse after Trump exempted smartphones and computers from import tariffs. The move brought some relief to US assets. However, the ongoing trade war between China and the US will keep risk appetite low.
Meanwhile, traders look forward to US retail sales data for more clues on future Fed moves. On the other hand, Canada will release crucial inflation figures today. Economists expect the monthly inflation figure to ease from 1.1% to 0.7%. An upbeat report will lower expectations for Bank of Canada rate cuts. This would support bets for a pause this week. Meanwhile, a soft report might increase rate-cut bets, hurting the loonie.
USD/CAD key events today
- Canada CPI m/m
- Canada median CPI y/y
- Canada trimmed CPI y/y
USD/CAD technical price analysis: Bears pause for breather at the 1.618 Fib extension
On the technical side, the USD/CAD price has remained in consolidation near a solid support zone. However, it trades far below the 30-SMA, showing bears are in the lead. At the same time, the RSI trades near the oversold region, indicating solid bearish momentum.
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Bears have met a solid support zone comprising the 1.618 Fib extension and 1.3802 support level. After a steep decline, the price has paused as the SMA catches up. However, while the price has started moving sideways, the RSI is climbing, showing bears are losing steam.
Therefore, USD/CAD might soon pull back to retest the 30-SMA. However, the downtrend will continue if the SMA holds firm and the price bounces lower. A break below the 1.3802 will strengthen the bearish bias.
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