USDCAD rallied on strong U.S. inflation figures yesterday but the recent downward trend may still win out. The pair currently trades at the 1.1313 level as the bulls and bears battle it out for control.
Tuesday saw U.S. inflation come in at 1.4% and although this was the expected result, it is still a healthy number in a very deflationary global economy. The number was only 0.1% higher than last month, but the possibility of another stimulus package, or the lifting of sanctions on a vaccine breakthrough could be catalysts for a further lift in prices. The Federal Reserve has set a target of 2% inflation but the U.S. economy saw inflation at 2.5% at the start of the year ahead of the virus and economists expect a strong third quarter from the world’s largest economy.
The U.S. prices data is more impressive when you consider that other G7 nation such as the U.K, Europe, and Canada are all seeing near-negative prints. With all of their central banks having 2% inflation targets, the dollar should expect more support but there are other aspects weighing. The approval of a second stimulus package has stalled again but another deal at $1.8 trillion or above seems inevitable and this is what has caused the greenback to suffer recently.
The U.S. dollar is trying to find a bottom against the Canadian dollar but with an election looming it may be volatile The recent selling would suggest that the downside is in charge and it’s possible that traders will pull out of the U.S. currency until the election result is assured.
USDCAD Technical Outlook
USDCAD bounced yesterday on the data and is lower today but the path forward will be determined by a tight range. A close above 1.3150 should test the 50-day moving average, whilst a close below the 1.3100 level will see further losses. The Investing Cube team is currently available to assist all levels of traders with the Forex Trading Course or through one-to-one coaching.
USDCAD Daily Chart