USDCAD pair aims for recovery after local decline

The USDCAD pair experienced a moderate decline on Wednesday amid a weakening US dollar. Pressure on the US currency intensified following the release of weaker-than-expected inflation data.

According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose by 2.3% year-over-year in April, falling short of the 2.4% forecast and the previous reading. Core inflation remained steady at 2.8%, in line with expectations. On a monthly basis, both indicators increased by 0.2%.

The softer inflation figures reinforced expectations of monetary policy easing by the Federal Reserve, leading to a corrective depreciation of the dollar. Earlier in the week, however, the currency found support from news of a 90-day suspension of trade duties between the US and China. President Donald Trump stated that a return to 145% tariffs on Chinese imports after the pause is unlikely, expressing confidence in reaching a trade agreement with Beijing. This development has eased concerns over escalating trade tensions.

Meanwhile, the Canadian dollar gained ground as market participants reacted favorably to the announcement of Canada's new Cabinet. Prime Minister Mark Carney stated the newly-formed government aims to recalibrate relations with the United States. The appointment of former Goldman Sachs banker Tim Hodgson as cabinet's minister of energy and resources also drew market attention.

From a technical perspective, USDCAD remains in a downward corrective trend on the H4 chart. The impulsive upward movement has stalled near the middle line of the channel. However, a potential resumption of growth is possible, as the Stochastic Oscillator’s lines have entered the oversold zone, signaling a possible move toward the upper boundary of the channel.

Signal:

The short-term outlook for the USDCAD suggests buying. 

The target is at the level of 1.4200.

Part of the profit should be taken near the level of 1.4040.

A stop-loss could be placed at the level of 1.3720.

The bullish scenario is short-term, so a trading volume should not exceed 2% of your balance.