USDCAD is attempting to recover due to slowing inflation and a hawkish Federal Reserve (Fed). After the surprise rate hike by the Bank of Canada, USDCAD experienced downward pressure for several days. However, this week’s inflation data indicates signs of a slowdown, reducing the probability of the next hike by half. Currently, the market is pricing in nearly a 50% probability of a hike at the next Bank of Canada meeting.

On the US side, Fed members have projected two more hikes in the dot plot, and Powell mentioned yesterday that the Fed still has a way to go, even if the pace of hikes is reduced, with no easing in sight for now.

The remaining days of this week will be crucial for USDCAD traders as both Canada and the US will release GDP data, in addition to the US Personal Consumption Expenditures (PCE) data. Analysts expect both the US and Canadian GDP to strengthen slightly, while the core PCE is anticipated to remain at 4.7% on a yearly basis.

A potential resistance to watch in the coming days is at 1.3330. Depending on the incoming data, a breakout above the former support level could drive the price higher, supported by a rising dollar index, weaker oil prices, and a weak bullish Relative Strength Index (RSI) divergence. The upward movement could extend up to 1.35, testing the downtrend that began in March. Conversely, a rejection from the 1.3330 resistance could lead to further downward pressure on the USDCAD.