The USD/CAD price analysis shows hotter-than-expected underlying inflation in Canada, leading to a decline in the Bank of Canada rate cut expectations. As a result, the Canadian dollar strengthened. However, the move was subdued as the dollar also gained due to tensions between Ukraine and Russia that could stall a peace deal. 

Data on Tuesday revealed that inflation in Canada increased by 0.1% in January, which aligns with estimates. Meanwhile, the annual figure increased by 1.9%. However, underlying inflation exceeded estimates, easing pressure on the Bank of Canada to lower borrowing costs. The median and trimmed CPI numbers increased by 2.7%, beating estimates. After the inflation report, markets were pricing a 63% chance of a BoC pause in March. This figure increased from 56% before the report, boosting the Canadian dollar.

Elsewhere, the US dollar strengthened amid safe-haven buying on Tuesday and Wednesday. Risk appetite fell after reports of a likely stall in the Russia-Ukraine peace talks. Ukraine’s President Zelenskyy postponed his travels to Saudi Arabia to March 10th. Meanwhile, Russia took a harder stance regarding the peace deal, raising fears it might not come soon. Continued tensions between the two countries will keep the risk of an escalation alive. 

USD/CAD key events today

• FOMC Meeting Minutes

USD/CAD technical price analysis: Bears keeping pressure

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USD/CAD 4-hour chart

On the technical side, the USD/CAD price is edging lower and could retest the 1.4150 support level. Moreover, the price trades below the 30-SMA with the RSI under 50, suggesting a bearish bias. The price fell sharply after it broke below the 1.4300 support level. However, it paused at the 1.4150 support, leading to a pullback. 

However, when bears returned after the pullback, price action showed weaker momentum. The price has made small-bodied candles. This is a sign that bears are exhausted, or bulls are getting stronger. If this continues, the price might fail to break below the 1.4150 support. In this case, bears would return to push the price above the SMA and retest the 1.4300 level. 

On the other hand, if bulls regain momentum, the price will break past 1.4150 to make a lower low and continue the downtrend.

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