USD/CAD is on a decline ahead of the Canadian CPI data. Analysts expect consumer prices to have risen by 0.4% in May MoM compared to April’s 0.5%. With the exclusion of food and energy components, the forecasted reading of 0.4% MoM is lower than April’s 0.5%.
The data comes a week after the BoC interest rate decision. After it began tapering in its April meeting, the central bank left its monetary policy unchanged. Investors are also keen on whether the Federal Reserve will hint to tapering talks in August/September.
USD/CAD is also reacting to the US oil inventory data. On Tuesday, the American Petroleum Institute (API) indicated that the weekly oil stockpiles had declined by 8.537 million barrels compared to the prior week’s reading of -2.108 million barrels. Analysts had expected a draw of 3.000 million barrels. Notably, this is the largest decline since September 2020.
As a commodity currency, the better-than-expected figures have boosted the Canadian dollar. Later in the day, the pair will be reacting to EIA’s oil inventory data.
USDCAD technical outlook
USD/CAD is trading along a prior resistance-turn-support level of 1.2176. The pair has extended Tuesday’s losses after hitting an intraday high of 1.2204. On a two-hour chart, it remains above the 25 and 50-day exponential moving averages.
I expect the currency pair to continue trading along the current support level as investors await further cues from the Canadian CPI data and the Fed interest rate decision. Depending on the outcome of the aforementioned events, it may decline to find support along the 25-day EMA at 1.2163. Below that point, the next target will be 1.2150. On the flip side, it may surge as the bulls attempt to push the price past the resistance level of 1.2200.
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