The US Dollar (USD) edges slightly higher against the Canadian Dollar (CAD) on Tuesday, attempting to recover after a prolonged six-day decline. The USD/CAD pair briefly climbed above the 1.3660 mark during the session but remains close to recent five-week lows near 1.3635, indicating that bullish momentum is still limited.
The Canadian Dollar continues to find support from recent domestic data. Canada’s latest Consumer Price Index (CPI) report showed that inflation picked up in March, although the increase came in below market expectations. This moderate rise in price pressures provides the Bank of Canada with flexibility to maintain its current policy stance while assessing incoming economic data. As a result, expectations for immediate policy changes remain subdued, helping the CAD hold its ground.
Meanwhile, geopolitical developments remain a key focus for market participants. Sentiment is relatively stable as investors monitor ongoing peace discussions between the United States and Iran. Reports suggest that Iran is preparing to send a delegation to Pakistan, despite earlier threats to withdraw from negotiations following the seizure of one of its vessels in the Strait of Hormuz.
According to sources, progress in talks is ongoing, with Donald Trump potentially participating if a breakthrough is reached. However, tensions persist as Iran remains hesitant to accept certain US conditions. With the current ceasefire set to expire soon and no extension planned, uncertainty continues to linger, limiting stronger directional moves in the currency market.
On the economic front, attention now turns to upcoming US data releases. Retail Sales for March are expected to show solid growth, reflecting continued consumer resilience. However, the control group—closely tied to GDP calculations—is projected to slow, which could temper optimism about overall economic momentum.
Additionally, focus will shift to the confirmation hearing of Kevin Warsh, where discussions around the independence of the Federal Reserve may influence market sentiment.
Trade Idea:
Sell near 1.3680 targeting 1.3580. CAD remains supported by stable inflation outlook, while USD gains may stay limited unless strong US data or geopolitical escalation drives safe-haven demand.