USD/CAD ANLAYSIS & TALKING POINTS
- Canadian CPI report keeps BoC on their toes.
- Fed rate announcement up next tomorrow.
- USD/CAD approaches 1.3371.
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CANADIAN DOLLAR FUNDAMENTAL BACKDROP
The Canadian dollar gained traction after Canadian CPI showed elevated inflation (see economic calendar below) on both core and headline prints (YoY). A major contributor has been the upside rally in crude oil prices for the headline read. CPI increased in all provinces with shelter prices rising via the rent index.
At the same time, US building permit data showed some marked improvements relative to forecasts but housing starts contracted quite significantly. While this data is unlikely to impact the Fed tomorrow, it does show a potential slowdown on the US housing market.
USD/CAD ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX Economic Calendar
Money markets are now pricing in an additional rate hike by the Bank of Canada (BoC) with inflation data supplementing recent robust jobs data. Looking forward to tomorrow, should the Fed announcement be construed in a dovish light, USD/CAD could breakdown further. The BoC’s Kozicki will be in focus later this evening and it will be interesting to see the response to the latest inflation report.
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BANK OF CANADA INTEREST RATE PROBABILITIES
Source: Refinitiv
TECHNICAL ANALYSIS
USD/CAD DAILY CHART
Chart prepared by Warren Venketas, IG
Daily USD/CAD price action shows the large drop post-CPI breaking below both the 50-day and 200-day moving (blue) averages respectively. The recent swing low at 1.3373 still holds but as mentioned above, a less aggressive stance from Fed Chair Jerome Powell could see the 1.3300 psychological handle under threat from CAD bulls.
Key resistance levels:
- 1.3500
- 200-day MA
- 50-day MA
Key support levels:
- 1.3373
- 1.3300
IG CLIENT SENTIMENT DATA: BEARISH
IGCS shows retail traders are currently LONG on USD/CAD , with 55% of traders currently holding long positions (as of this writing). Download the latest sentiment guide (below) to see how daily and weekly positional changes affect USD/CAD sentiment and outlook!
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Contact and followWarrenon Twitter:@WVenketas
