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USD/CAD Retraces Following Softer Canadian CPI, Focus Shifts to Fed

USD/CAD slipped to 1.3565 after Canada’s Consumer Price Index (CPI) showed inflation cooling faster than anticipated, fueling speculation of a potential early rate cut by the Bank of Canada (BoC).

Key Factors:

  • Canadian CPI Surprise: Unexpectedly soft inflation data increases the likelihood of a BoC rate cut in June.
  • US Housing Data: Positive figures suggest resilience in the US housing sector.
  • Fed Decision Looms: Market focus shifts to Wednesday’s Federal Reserve (Fed) meeting, with traders awaiting updated projections for US interest rates.

Technical Outlook:

  • Inverted Hammer Formation: Failure to hold above 1.3600 creates a bearish ‘inverted hammer’ candlestick pattern, suggesting a potential downside.
  • Key Support Levels: The 100-day MA (1.3520), followed by the 200/50-day MA confluence (1.3481/87), offer potential support.
  • Bullish Case: A reclaiming of 1.3600 could lead to a retest of the November 24 high at 1.3711.