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USD/CAD battles the 200-DMA after US PPI decelerates

  • USD/CAD extended its losses for the second straight day as sellers eye a break of the 200-DMA.
  • July’s US inflation reports show signs of peaking, with CPI at 8.5% YoY and PPI at 9.8% YoY, below their previous month’s readings.
  • Traders’ focus shifts toward the University of Michigan Consumer Sentiment and Inflation Expectations.

The USD/CAD slides towards the 200-day EMA on Thursday due to a risk-on impulse propelled by additional US inflation data, which completes the puzzle alongside consumer inflation, leaving to the Fed, the call if US inflation has already peaked or not. Also, the labor market began to show signs of moderation. All those factors weighed on the greenback, which, as portrayed by the US Dollar Index, is down 0.24% at 104.960.

The USD/CAD is trading at 1.2738 under its opening price after hitting a daily high at 1.2792, but as North American traders got to their desks, tumbled the major to its daily low at 1.2727, 13 pips below the 200-day EMA.

USD/CAD falls on US inflation slowing, easing Fed's pressure

Investors’ mood is positive, as reflected by EU and US equities trading in the green. A report from the US Labor Department showed that wholesale prices cooled down, with the PPI increasing by 9.8% YoY, lower than foreseen. Moreover, the core PPI, which excluded volatile items, came aligned to estimations of 7.6% YoY, less than June’s 7.9%.

Regarding the labor market, US Initial Jobless Claims for the week ending on August 6 rose 262K, less than 263K expected but jumped for the second-consecutive week.

Given the abovementioned, the USD/CAD dropped as US inflation on both sides of the spectrum slid. Therefore, traders moved towards riskier assets in the FX space, namely the antipodeans and commodity-linked currencies, like the loonie.

That said, crude oil prices rose for the second consecutive day, underpinning the CAD after hitting a weekly low of $87.25 per barrel. At the time of writing, Western Texas Intermediate (WTI), the US crude oil benchmark, exchanges hands at $94.48 pb.

Hence, USD/CAD traders should also be aware of a possible break of the 200-DMA, which, once decisively broken, exposes the 1.2700 mark as sellers’ next challenge.

What to watch

On Friday, the US economic calendar will feature the University of Michigan Consumer Sentiment, alongside inflation expectations.

USD/CAD Key Technical Levels

USD/CAD

Overview
Today last price1.2738
Today Daily Change-0.0030
Today Daily Change %-0.23
Today daily open1.2775
 
Trends
Daily SMA201.2885
Daily SMA501.2875
Daily SMA1001.2793
Daily SMA2001.2743
 
Levels
Previous Daily High1.2896
Previous Daily Low1.2751
Previous Weekly High1.2985
Previous Weekly Low1.2768
Previous Monthly High1.3224
Previous Monthly Low1.2789
Daily Fibonacci 38.2%1.2806
Daily Fibonacci 61.8%1.284
Daily Pivot Point S11.2719
Daily Pivot Point S21.2663
Daily Pivot Point S31.2575
Daily Pivot Point R11.2863
Daily Pivot Point R21.2952
Daily Pivot Point R31.3008

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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