Why Is USDCAD Sliding Below 1.3650? | Key Factors Driving the Pair's Movement

The P2Pool Monero calculatorUSDCAD currency pair has been exhibiting notable weakness, slipping below the 1.3650 threshold during Wednesday's early European trading session. This movement comes amid a period of consolidation for the US Dollar (USD), with the pair currently hovering around 1.3640. The downward pressure persists despite recent Canadian inflation figures that might typically bolster the Loonie, suggesting complex market dynamics at play.Canada's inflation landscape showed further moderation in April, with the annual Consumer Price Index (CPI) cooling to 2.7% from March's 2.9% reading. This deceleration, primarily driven by easing food price pressures, aligns precisely with market expectations. The monthly CPI figure also demonstrated moderation, settling at 0.5% compared to the previous 0.6%. Perhaps more significantly, the Bank of Canada's core CPI measure registered a more pronounced slowdown, coming in at 1.6% year-over-year versus March's 2% increase.These inflation developments have substantially altered market expectations regarding the Bank of Canada's monetary policy trajectory. Traders have markedly increased their bets on a June rate cut, with the probability jumping to approximately 55% from just 39% prior to the data release. This shifting expectation creates potential headwinds for the Canadian Dollar (CAD), as divergent monetary policy paths between the BoC and Federal Reserve could influence the currency pair's direction.Across the border, Federal Reserve officials maintain their cautious stance, emphasizing the need for additional data to confirm inflation's sustained movement toward the 2% target. Recent commentary from Fed policymakers suggests patience remains the operative word. Atlanta Fed President Raphael Bostic highlighted the importance of careful deliberation regarding initial rate adjustments to prevent potential inflation volatility. Similarly, Fed Governor Christopher Waller indicated requirements for several more months of favorable inflation data before considering policy easing.Market participants now turn their attention to upcoming catalysts that could provide further direction for the USDCAD pair. The release of FOMC Minutes and scheduled remarks from Chicago Fed President Austan Goolsbee later in the day may offer valuable insights into the Fed's policy calculus. These events could either reinforce or challenge current market expectations regarding the timing and pace of potential Fed rate adjustments.From a technical perspective, the pair currently trades below its 20-day Simple Moving Average (1.3673) while remaining above the 50-day SMA (1.3638). Key support and resistance levels to watch include the daily pivot points at 1.3621 (S1) and 1.3682 (R1), with Fibonacci levels at 1.3652 (38.2%) and 1.3638 (61.8%) potentially serving as near-term inflection points.The interplay between softening Canadian inflation data and the Fed's patient approach creates an interesting dynamic for USDCAD traders. While the immediate reaction to Canada's CPI figures might suggest CAD weakness, the broader context of Fed policy expectations and technical factors suggests the pair's trajectory remains nuanced. Market participants would do well to monitor both fundamental developments and price action closely in the sessions ahead