USD/CAD: Inflation Week Begins as Geopolitics impacts USD/CADOANDA:USDCADKingCephas2026After several weeks of headline-driven volatility, the market enters one of the most important weeks of the month with a much clearer focus: inflation and central bank policy. Last week's Canadian employment report reinforced the resilience of the Canadian economy, while the latest U.S. labour market data left the U.S. Dollar searching for its next catalyst. Over the weekend, geopolitical tensions briefly returned to the spotlight following military exchanges between the U.S. and Iran and concerns surrounding the Strait of Hormuz. Though the US is claiming shipping activity has resumed and fears of a prolonged supply disruption are still there, with Iran claiming the strait is still closed. The middle east news opened a gap up on the both the DXY and WTI. Despite these news, markets will now shift their attention back to macro fundamentals. Technical Perspective The technical picture has evolved significantly. For nearly two weeks, USD/CAD repeatedly failed to establish acceptance above the 1.4200–1.4250 resistance zone, producing a series of lower highs that hinted at weakening bullish momentum. The subsequent break below support and the ascending trendline suggests that the market has entered a corrective phase. Rather than chasing the downside, my focus is now on whether price retraces into the 50%–61.8% Fibonacci retracement ("golden pocket"), where I will assess whether sellers remain in control. A healthy retracement followed by bearish rejection would strengthen the case for continuation lower. Macro Drivers This Week Three events are likely to dominate price action: Tuesday U.S. Consumer Price Index (CPI) Wednesday U.S. Producer Price Index (PPI) Bank of Canada Interest Rate Decision The Canadian labour market has already given CAD a supportive backdrop. The next question is whether U.S. inflation will reinforce or weaken the U.S. Dollar. A softer CPI would likely reduce expectations for restrictive Fed policy, supporting Gold and increasing downside pressure on USD/CAD. Conversely, stronger inflation could revive Treasury yields and provide the U.S. Dollar with fresh momentum. Levels I'm Watching Resistance 1.4145–1.4170 1.4200 1.4250 Support Recent swing low Psychological 1.4000 area Trade Thesis I'm treating last week's breakdown as the beginning of a corrective move rather than a confirmed long-term trend reversal. My plan is straightforward: Allow price to retrace. Watch the 50%–61.8% Fibonacci retracement. Look for confirmation from price action. Let CPI and the Bank of Canada provide the next fundamental catalyst. The objective isn't to predict the data—it's to be positioned for whichever scenario the market confirms. My Bias Short-term: Bearish while below former support. Medium-term: Dependent on U.S. inflation and the Bank of Canada's policy guidance. The Trading Advantage Markets don't reward certainty. They reward disciplined preparation. This week, inflation has the potential to determine whether last week's correction develops into a sustained trend or proves to be a temporary pullback