USD/CAD is trading higher ahead of the Canadian inflation data. However, it remains on a prolonged downtrend. As a commodity currency, the rise in crude oil prices have strengthened the Canadian dollar against the US dollar. After hitting $0 in April 2020, WTI futures have surged to the current $64.54. Subsequently, USD/CAD has dropped by about 17.68% since mid-March 2020.
In today’s session, the currency pair is rebounding as investors await EIA’s oil inventories data. On Tuesday, API indicated that oil stockpiles rose by 0.620 million barrels in the past week compared to the prior -2.533 million barrels. However, the reading was better than the expected surge by 1.680 million barrels.
USD/CAD will also be reacting to Canada’s CPI numbers. Analysts expect consumer prices to have risen by 0.4% in April MoM compared to 0.5% in March. With the exclusion of energy and food, economists will be keen on whether core CPI exceeds the prior month’s 0.3% on a month-on-month basis.
USDCAD Technical Outlook
USD/CAD is up by 0.06% at 1.2073. However, on a four-hour chart, it is trading below the 25 and 50-day exponential moving averages. Besides, the formation of a bearish flag is a sign that the downtrend is likely to continue.
I expect USD/CAD to rise to 1.2100 before declining further. The currency pair is likely to find support at the psychological level of 1.2000. This thesis will be invalidated by a move above 1.2130.