Usdcad declines amid mixed inflation signals in Canada

USDCAD Analysis

Performance after Tuesday
Period	Pct	Chg	Momentum
Tuesday	-0.16%	-22.2 Pips
Week to-date	-0.41%	-57 Pips
May	0.84%	116 Pips

Upcoming key events (London Time)

No major events for the day.

What happened lately

In April 2025, Canada experienced mixed signals in its inflation metrics. The Bank of Canada noted an increase in the Core CPI Inflation Rate (month-on-month), which rose to 0.5% from a previous 0.1% in March. Additionally, the Core Inflation CPI for a 12-month period increased from 2.2% in March to 2.5% in April, reflecting underlying inflation pressures within the economy. However, other inflation indicators showed a decline; Canada’s overall CPI inflation rate over a 12-month period decreased to 1.7% from 2.3% in March, and the CPI Inflation Rate for April saw a month-on-month contraction of -0.1%, down from an increase of 0.3% in March. This divergence suggests nuanced inflation dynamics, possibly influenced by specific sectoral pressures or adjustments in core economic inputs.

The USDCAD pair experienced a slight decline of -0.16% on Tuesday, settling at 1.39148. This movement appears to be part of a consolidation phase, indicating that currency traders are still assessing the implications of recent economic data from Canada. The data presents a mixed outlook; higher core inflation may fuel expectations for monetary policy tightening, supporting the Canadian dollar against the USD. Conversely, the overall disinflation trend might concern policymakers, cooling any hawkish stance and exerting downward pressure on the CAD. Without significant upcoming events to drive sharp movement, the USDCAD may continue to fluctuate around current levels, balancing between the competing influences of core and headline inflation dynamics.

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What can we expect from USDCAD today?

USDCAD on Tuesday dropped -0.16% to 1.39148. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for USDCAD looks mixed as the pair is likely to consolidate above 1.38898 (S1).

Looking ahead today, to see upside interest, we prefer to look at price breakout of last daily high of 1.39683 or trades above daily pivot 1.3929. Break above could target R1 at 1.39541. While to the downside, we are looking at 1.38898 (S1) and daily low of 1.39040 as support levels. USDCAD need to break on either side to indicate a short-term bias. A close below 1.39040 would indicate selling pressure.

For the week to-date, take note that USDCAD is mixed as compared to the prior week.

Key levels to watch out:

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