USD/CAD price analysis: Canadian Dollar struggles near 1.40 amid soft inflation and trade uncertainty

• USD/CAD trades near the 1.4000 area after bouncing from mid-1.38s earlier this week.
• Softer Canadian inflation and Powell's tariff warnings pressure the Canadian Dollar outlook.
• Key resistance stands at 1.4060; technical backdrop skews bearish despite recent rebound.

USD/CAD hovered near the 1.4000 zone on Tuesday, consolidating after recovering from earlier lows around the 1.3850 region. The Canadian Dollar failed to gain traction despite a cooler-than-expected inflation report for March, while traders brace for the Bank of Canada's policy decision. Meanwhile, the US Dollar attempted a mild rebound after days of losses tied to ongoing trade tensions with China.

Canada's inflation rate slowed to 2.3% annually in March, below expectations and down from 2.6% previously. Month-over-month, CPI rose just 0.3%, missing the 0.7% forecast. The data has slightly softened market expectations that the BoC will hold rates steady at 2.75% in its first policy meeting since June. Markets will closely watch Governor Macklem's tone, especially as uncertainty rises over how Trump's aggressive tariff policy may ripple into Canada's economic outlook.

On the US side, the Greenback faces persistent pressure from global investors as Trump's tariff escalation continues to undermine confidence. According to Commerzbank analysts, the complexity and unpredictability of current US trade policy are raising inflation risks while damaging trust among global trading partners. Fed Chair Powell echoed these concerns, warning that the inflationary effects of tariffs could be stronger and more prolonged than initially expected. He added that it's too early to determine the right path for interest rates and that the Fed is in no rush to act.

Technically, USD/CAD shows bearish signals overall, even with a modest gain on the day. The pair trades near the top of its daily range between 1.3850 and 1.3980. The Relative Strength Index sits near 37 in neutral territory, while the MACD prints a sell signal. Despite some mixed signals from momentum indicators, moving averages reinforce the downside outlook: the 20-, 100-, and 200-day SMAs, along with the 10-day EMA, all suggest further weakness ahead. Support rests at 1.3827, while resistance levels are located at 1.4002, 1.4060, and 1.4063.

USD/CAD technical analysis