US inflationary pressures ease, what else?

Inflation eases in the US economy

The US CPI rates for June came in lower than expected, weighing on the USD in the FX market yesterday. Market expectations for a rate hike by the Fed in the September meeting are still present, yet overall, the market’s hawkish expectations seem to be easing. Today we get the US PPI rates also for June and a possible confirmation of a wider-than-expected easing of inflationary pressures in the US economy, this time at a producers’ level, could provide additional bearish tendencies for the greenback. 

BoC expected to remain on hold

On a monetary level we highlight today for Loonie traders the release of BoC’s interest rate decision. The bank is widely expected to remain on hold and proceed with a rate hike only at the end of the year. Should we see the bank in its forward guidance sounding hawkish we may see the CAD getting some support, while a failure of the BoC to do so, or even a dovish tone,  could weigh on the CAD.

Oil prices continue to edge higher

Oil prices continued to edge higher yesterday, as market worries for the US-Iran conflict remained. The vital sea way of the Straits of Hormuz remains under threat as hostilities intensify. The possibility of a diplomatic solution seems to be slipping away and a possible intensification of the market’s worries could boost oil prices further, yet for such a scenario to materialise we may need a substantial escalation of tensions.

Gold remains steady

Gold’s price remained steady despite the weakening of the USD. We still view the negative correlation of the USD with gold’s price as being active and gold traders seem to have looked beyond the June CPI rates. The prospect of inflationary pressures intensifying, given the high oil prices, and a subsequent tightening of the Fed’s monetary policy, seems to spook gold buyers.

Other highlights for today

Today we get Sweden’s and Norway’s CPI rates for June and the Eurozone’s industrial output for May. Oil traders may be interested in the release of the weekly EIA crude oil inventories figure. On a monetary level we also note that NY Fed President Williams and Fed Board Governor Cook speak. In tomorrow’s Asian session, St. Louis Fed President Musalem speaks, while we also get Japan’s Chain Store Sales for June. 

Charts to keep an eye out

USD/CAD tumbled yesterday breaking the 1.4145 (R1) support line, now turned to resistance. As the pair’s downward movement seems to be accompanied also by a bearish market sentiment, we adopt a bearish outlook. Should the bears remain in charge, we may see USD/CAD breaking the 1.4020 (S1) support line clearly and start aiming for the 1.3880 (S2) support level. Should the bulls take over, which currently seems a bit remote, we may see USD/CAD breaking the 1.4145 (R1) resistance line and continue to break also the 1.4255 (R2) resistance level. Please note that BoC’s interest rate decision may substantially shift the pair’s direction given its gravity on a fundamental level.  

WTI’s edged higher yesterday placing more distance between its price action and the 76.60 (S1) support line. We note the bullish tendencies of the commodity’s price, yet at the same time also note that the market sentiment is currently neutral as the RSI indicator remained near the reading of 50. Should the bulls remain in control, we may see WTI’s price breaking the 82.00 (R1) resistance line with the next possible target for the bulls being set at the 88.60 (R2) resistance level. Should the bears get in the driver’s seat, we may see WTI’s price dropping, breaking the 76.60 (S1) support line, opening the gates for the 71.65 (S2) support level.

Calendar follows

USD/CAD daily chart

• Support: 1.4020 (S1), 1.3880 (S2), 1.3730 (S3).
• Resistance: 1.4145 (R1), 1.4255 (R2), 1.4410 (R3).

WTI daily chart

• Support: 76.60 (S1), 71.85 (S2), 67.05 (S3).
• Resistance: 82.00 (R1), 88.60 (R2), 93.30 (R3).