According to Canada's latest economic data, inflation, monetary policy, and consumer performance are in an intertwined and highly uncertain phase. First, regarding inflation, the Consumer Price Index (CPI) rose 1.8% year-on-year in February, down from 2.3% in January and below market expectations. This decline is partly due to the "base effect" caused by the end of temporary GST/HST relief measures in the same period last year, which artificially lowered the current year-on-year figure. Excluding this, inflation would be roughly 1.9%, still close to the Bank of Canada's 2% target. While inflation has slowed, new upside risks are emerging, particularly from energy markets. International oil prices have surged amid Middle East conflicts, narrowing the year-on-year decline in Canadian gasoline prices and potentially pushing inflation higher in the future. Energy price shocks have a dual impact: they boost export revenues but also squeeze household disposable income, thereby dampening consumption. Against this backdrop, the Bank of Canada has kept its key interest rate unchanged at 2.25% for several consecutive months. Governor Tiff Macklem emphasized that the economy is facing "extreme uncertainty," including changes in the global trade environment and geopolitical shocks from the Middle East. Considering the growth, Canada's momentum remains weak. GDP contracted in the fourth quarter of 2025, and it was still below prior expectations despite a growth in early 2026.

Based on the four-hour chart, USD/CAD shows a narrowing Bollinger Band, with flat moving averages and prices oscillating between the Bollinger Upper and Middle bands, indicating a short-term uptrend. The MACD and signal lines remain above the zero line but have formed a death cross, suggesting weakening upward momentum. This implies the uptrend persists but may face a pullback. Resistance levels are near the EMA800 and round figures, at 1.377 and 1.38, respectively. RSI stands at 52, reflecting a largely wait-and-see investor sentiment. Daily, the Bollinger Bands are also narrowing, with flat moving averages. The MACD has formed a golden cross, with both lines back above the zero line, indicating diminishing downward pressure: a sign of bullish divergence and continued rebound potential. After breaking through the Bollinger Middle Band and EMA50, the price is set to challenge EMA200 around 1.38 again. RSI is at 55, showing neutral-to-bullish sentiment as lows gradually rise. Therefore, buying at lows is recommended.

Trading direction: Buy

Entry Price: 1.371

Target Price: 1.4

Stop Loss: 1.35

Support: 1.35/1.325/1.28

Resistance: 1.38/1.4/1.42