USD/CAD Price Analysis: BoC Rate Cut Odds Fall Amid Hot CPI

• The USD/CAD price analysis indicates a lower likelihood of a BoC rate cut in June.

• Core inflation in Canada was hotter than expected.

• Fed policymakers maintained that the economic outlook was uncertain.

The USD/CAD price analysis indicates a lower likelihood of a Bank of Canada rate cut in June, which is pushing the Canadian dollar higher. At the same time, the dollar was fragile after Fed policymakers maintained that the risk of stagflation in the US remained high after Trump’s policy changes. 

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Data on Tuesday revealed that inflation in Canada fell by 0.1% as expected. However, core inflation was hotter than expected. The median CPI increased by 3.2% compared to the forecast of 2.9%. Meanwhile, the trimmed CPI came in at 3.1%, well above the forecast of a 2.8% increase. The upbeat figures boosted the Canadian dollar. Moreover, the numbers lowered the likelihood of a BoC rate cut in June. 

Before the report, traders were pricing a 65% chance of a June rate cut. However, that dropped to 33% after the report. At the last meeting, the BoC paused its easing. With inflation still hot, they might pause again in June. 

On the other hand, Fed policymakers maintained that the economic outlook was uncertain. Fed’s Alberto Musalem noted that despite the recent trade truce between China and the US, the labor market could weaken further. At the same time, inflation might increase.

USD/CAD key events today

Market participants do not expect any key economic releases from the US or Canada. Therefore, traders will keep digesting Canada’s inflation report.

USD/CAD technical price analysis: Triangle breakout signals new decline

USD/CAD technical price analysis

On the technical side, the USD/CAD price has broken out of its triangle pattern. At the same time, the price has broken below the 1.3900 support level, making a lower low and confirming a new direction. The bearish bias is strong with the price well below the 30-SMA and the RSI near the oversold region. 

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Initially, the price paused its rally and started trading in a triangle pattern below the 1.4000 key level. Eventually, the price broke out on the downside to start a new downtrend. Bears are now targeting the 1.3800 support level. 

However, before that, the price might pull back to retest the triangle before collapsing to fresh lows. The decline will continue as long as the price holds its position below the 30-SMA and the RSI stays under 50.

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