The USD/CAD lost momentum after approaching the 1.3000 level. During the American session, amid broad-based dollar’s weakness turned to the downside, erasing daily gains. Recently it reached 1.2915 and is it holding under 1.2950 with a negative intraday bias.

The next support for USD/CAD is located around 1.2900. A break lower could open the doors to more losses. The next support levels are seen at 1.2880 and 1.2860. On the upside, above 1.2960, the intraday bias would turn neutral/bullish.

Inflation everywhere

Data released on Wednesday showed the Consumer Price Index in Canada rose to an annual rate of 7.7%, above market expectations. “Annual inflation may still take some time to return to comfortable levels and this morning's report will not reduce the pressure on the central bank to withdraw its monetary accommodation to calm demand. With this morning's report being the last CPI release before the Bank of Canada's next rate decision, today's data should prompt the Bank to announce a 75 basis point increase in the policy rate in July” mentioned analysts at the National Bank of Canada.

Commenting on inflation reaching the highest level since 1983, Bank of Canada Senior Deputy Governor Carolyn Rogers said that it was an "unwelcome number."

BOC's Rogers: May CPI data is an unwelcome number

Inflation figures did not boost the Canadian dollar. The decline of USD/CAD during the American session was triggered by a slide of the dollar amid an improvement in market sentiment, lower US yields and a recovery in commodity prices.

Fed’s Powell comments weighed on the dollar. He mentioned interest rate hikes could cause a recession and warned that is going to be very challenging to achieve a soft landing. The dollar lost ground during Powell’s testimony. He will deliver a new testimony on Thursday.

Technical levels