- The USD/CAD price analysis shows a retreat from recent peaks.
- US inflation data confirmed that Trump’s tariffs have increased price pressures in the economy.
- Canada’s inflation increased from 1.7% in May to 1.9% in June.
The USD/CAD price analysis shows a retreat from recent peaks as traders weigh the inflation figures from the US and Canada. US inflation accelerated more than expected in June, leading to a drop in Fed rate cut expectations. At the same time, inflation in Canada increased, lowering the chances of a BoC rate cut in July.
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The US dollar rallied on Tuesday after data confirmed that Trump’s tariffs have increased price pressures in the economy. The headline inflation figure came in at 2.7%, beating forecasts of 2.6%. Meanwhile, the monthly CPI increased by 0.3% as expected. Higher import prices have led to higher prices for consumers, which may keep the Fed on a cautious path.
The report confirmed Powell’s worries about a spike in inflation. Furthermore, Trump is continuing with his tariff campaign and has threatened higher levies on several countries. If tariffs rise again, inflation may continue to climb. This would force the Fed to weigh growth against inflation.
Meanwhile, in Canada, data revealed that inflation increased from 1.7% in May to 1.9% in June. This, together with last week’s upbeat jobs report, will likely convince the Bank of Canada to keep rates on hold.
USD/CAD key events today
- US core PPI m/m
- US PPI m/m
USD/CAD technical price analysis: Bulls break past resistance zone, eye 1.3800
On the technical side, the USD/CAD price has broken above a solid resistance zone comprising the 0.618 Fib retracement and the 1.3700 key level. The price now trades above the 30-SMA, with the RSI above 50, supporting a bullish bias.
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The break above the resistance zone is a significant milestone that has solidified the bullish bias. Initially, the price was consolidating below this zone until the SMA caught up. However, bulls made a solid candle that broke above the resistance and signaled a surge in momentum.
After the break, the price is pulling back and might retest the zone before climbing higher. The break has cleared the path to the 1.3800 resistance. However, the price will only climb to this level if bulls can maintain their position above the resistance zone.
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