USD/CAD extends softer data-led upsurge, taps 1.29 mark
| • Disappointing Canadian data prompts some aggressive selling around CAD.
• Weaker oil prices/renewed USD strength further collaborated to the strong up-move.
• Sustained move beyond 1.29 handle to open room for additional gains.
The USD/CAD pair built on disappointing Canadian data-led upsurge and spiked back above the 1.2900 handle in the last hour, albeit quickly retreated few pips thereafter.
The pair bounced back sharply from sub-1.2800 level and rallied over 100-pips after the key headline Canadian inflation figures fell short of consensus estimates, showing a y-o-y rise of 2.2% and m-o-m rise of 0.3% in April. Adding to the disappointment, core retail sales unexpectedly contracted in March and largely negated a better-than-expected headline reading.
Against the backdrop of NAFTA concerns, today's weaker Canadian macro data might have dampened expectations for an immediate BoC rate hike move and prompted some aggressive selling around the Canadian Dollar.
This coupled with a modest retracement in crude oil prices, with tends to dent demand for the commodity-linked currency - Loonie, and some renewed US Dollar buying interest kept pushing the pair higher through the early NA session.
Today's strong up-move lifted the pair back closer to the weekly tops, with a follow-through up-move, led by some fresh short-covering above the 1.2900 handle, now looking a distinct possibility.
Technical levels to watch
Sustained momentum beyond the 1.2900 handle could get extended towards mid-1.2900s, above which the pair seems all set to aim towards reclaiming the key 1.30 psychological mark.
On the flip side, 1.2875-70 zone now seems to protect the immediate downside and is followed by 50-day SMA support near the 1.2830-25 region, which if broken might turn the pair vulnerable to head back towards testing 1.2755-50 area.
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