USDCAD under pressure ahead of key US data and rate decisions

• President Trump’s fluctuating tariff announcements on Canadian imports have added volatility to the Loonie
   
• US CPI data expected to show a decline in inflation, which could impact market movements
   
• Bank of Canada is anticipated to cut interest rates by 25 basis points
   
• Technical analysis shows USDCAD coiling in a symmetrical triangle, with key levels to watch

This week, the Canadian Dollar (CAD) has emerged as the weakest currency in the G10 against the US Dollar.

The currency has been subjected to substantial volatility over the past few months, and this instability was highlighted yesterday when President Trump announced drastic tariffs of 50% on aluminium and steel imports from Canada—only to retract those remarks just hours later.

Today, the Loonie faces an even more tumultuous trading environment, as critical US Consumer Price Index (CPI) data will be released at 12:30 GMT, followed by an announcement from the Bank of Canada regarding interest rates at 13:45 GMT.

The expected US CPI data is poised to reveal a significant decline in inflation across several key metrics:

• 2.9% year-on-year headline CPI (Feb 2025 vs. Feb 2025)
  If true, that would be notably lower than December's 3.4% y/y number
   
• 3.2%  year-on-year core CPI 
  (excluding food and energy prices, which tend to see bigger swings)
  If true, that would be lower than last January’s 3.3% y/y number
   
• 0.3% month-on-month CPI (Feb 2025 vs. Jan 2025)
  If true, that would be lower than January's 0.5% m/m number
   
• 0.3% month-on-month core CPI
  (excluding food and energy prices, which tend to see bigger swings)
  If true, that would be lower than January’s 0.4  m/m core number

Historically, US CPI reports have sparked significant market reactions, often leading to price swings of up to 0.9% in the hours following their release, underscoring their importance.

In addition, the Bank of Canada is widely expected to cut interest rates by 25 basis points, lowering the benchmark from 3% to 2.75%. Such a decision would likely exert additional pressure on the Canadian dollar, particularly if further rate cuts are hinted at.
 

Over the past year,  the Bank of Canada’s decisions have historically resulted in market movements of as much as 0.2% up or down within a six-hour window.

Traders and investors should prepare for a bumpy ride as these pivotal announcements unfold.

Technically speaking …

USDCAD, Daily is coiling up into a symmetrical triangle.
 

Bouncing off the downward sloping resistance trendline, it may retest the upward sloping trendline before breaking out.

Loonie bears, (those looking to see the pair decline) may pay attention to the following potential support levels

• 1.43510 – The 50-day simple moving average
   
• 1.43336 – A significant price level
   
• 1.43175 – The 21-day simple moving average
   
• 1.42616 – The upward sloping trendline from September 26, 2024

Traders and investors looking to see the USDCAD rally, may focus on the following potential resistance zones

• 1.44645 – The 61.8 golden Fibonacci level
   
• 1.45041 – The downward sloping trendline
   
• 1.45903 – The 38.2 Fibonacci level

The Fibonnaci levels are drawn from January 20ths low 1.42610  to February 3rds high 1.47929