The Canadian Dollar’s recovery attempt has stalled following softer-than-expected June inflation data, according to Societe Generale strategists. The loonie had been rebounding from 1.4250 toward 1.4000 against the US Dollar but failed to reclaim the critical 50-day moving average positioned around 1.3991. This technical failure now threatens the currency’s mean-reversion trajectory.
The situation has deteriorated further as fresh US tariff measures on Canadian goods add fundamental headwinds to the already fragile technical picture. Traders who anticipated a continued CAD recovery are now reassessing positions as both domestic inflation weakness and cross-border trade tensions weigh on the currency. The combination of weak inflation data reducing Bank of Canada rate hike expectations and renewed tariff pressures creates a challenging environment for bullish CAD positions in the near term.
FXnCO Insight
USD/CAD bulls should watch for sustained breaks above 1.4250 as tariff developments and soft inflation data undermine the loonie’s mean-reversion case, making further CAD weakness the higher probability scenario.
Source: FXStreet