USDCAD consolidates as inflation data halts correction

The USDCAD pair has slammed into a pause, showing a flat drift around 1.38850 in the wake of the latest US inflation report. The preceding correction was fueled by a dollar rout, sparked by the Trump administration's extraordinary threat to criminally prosecute Federal Reserve (Fed) Chairman Jerome Powell—a move that triggered a broad defense of central bank independence and rattled confidence in American institutional stability.

However, December's Consumer Price Index (CPI) released Tuesday proved to be the circuit breaker for the greenback's freefall. A hotter-than-expected 0.3% monthly rise highlighted US stubborn inflation, particularly in housing and food costs. This reinforced the market's belief that the regulator will stand pat on interest rates at its upcoming meeting, shifting the spotlight back to economic fundamentals and handing the dollar a much-needed reprieve. 

The loonie isn't helping its own case in the pair, either. Even with oil prices buoyed by Middle East tensions, domestic headwinds are piling up, particularly around the country's export potential. Uncertainty ahead of the USMCA renegotiation and a series of underwhelming jobs reports are weakening the Bank of Canada's (BoC) hawkish stance, thus reducing the odds it can keep rates at current levels. Internal catalysts aren't strong enough to fuel the currency right now.

On the charts, bullish momentum looks tired. The Stochastic Indicator (%K=69, %D=75) is turning down from overbought levels, a sign that buyers are stepping back. Meanwhile, the Chaikin Oscillator, though still in positive territory, is rolling over from its recent peak, suggesting capital inflows are slowing. With the price printing doji-like candlesticks and these two indicators losing steam, the stage is set for an extended range-bound movement.

Consider the strategy for your trading down below:

Given the already baked-in market reaction to the Fed independence crisis, entering a buy position on USDCAD near 1.38520 appears strategically sound. The pair is likely to trade flat in the coming sessions until a new catalyst emerges, offering a defined range to play. Place Take profit at 1.39700. Set Stop loss at 1.37500.

This forecast holds true from January 14 till January 21, 2026.