• USD is on the backfoot following a miss in US CPI data.
  • USD/CAD bears testing the commitments in the daily support structure.

USD/CAD is trading at 1.2495 and down nearly 0.2% at the time of writing as it attempts to correct from the lows of the day marked down at 1.2489 so far. 

The US dollar is weaker which sent the pair lower from a high 1.2548 at the start of the day.

The US dollar's DXY index dropped against a basket of major currencies after data showed US consumer price increases slowed in July.

Investors were quick to take profits as they weighed the impact of US inflation data on the Federal Reserve's policy outlook.

The dollar index DXY, which measures the greenback against a basket of other major currencies, was down 0.22% at 92.865 and near to the lows of 92.801 in mid-day trade. 

Earlier, it hit 93.195, the highest since April 1, and not far off of its 2021 high of 93.439.

US yields also sank, with the 10-year falling from a high of 1.3760% to a low of 1.3030%.

Subsequent to the fall in the greenback, the CAD was able to add to its recovery from a near two-week low the day before.

The consumer price index increased 0.5% last month after climbing 0.9% in June, the Labor Department said.

In the 12 months through July, the CPI advanced 5.4%. Excluding the volatile food and energy components, the CPI rose 0.3% after increasing 0.9% in June.

Economists polled by Reuters had forecast overall CPI would rise 0.5% and core CPI 0.4%.

While still historically high, this easing in US inflation will have taken some pressure off the Federal Reserve in regard to the timing of tapering its asset purchases.

In any case, most Fed members believe any inflation pressures will be transitory and owing only to the pent up demand following months of COVID-19 lockdowns, resulting in higher consumption and spending.

The Jackson Hole on the 26th - 28th comes around the same time as the PCE, the Fed's preferred inflation measure which is due for release on the 27th.

If that data surprises on the upside then there is still the potential for a taper announcement during the event, although most unlikely. 

Instead, the Fed might prefer to see if there is any momentum in the labour market considering last Friday's report that could be compared to next month's employment report.

if there is a lack of positive confluence in the data, then a taper could well be put off towards the end of the year to allow for more evidence to come through in terms of data that indicates the economy is on track. 

The wild card on all of this is the delta variant. 

The Fed would be inclined to remain patient and cautious in the event of an adverse turn in the situation. 

In addition to the weakness in the greenback, the US Senate has passed President Biden's infrastructure package and thus boosted market expectations of demand for commodities.

Oil prices got a lift on the news which tends to correlate to the CAD. WTI is higher by 1.12% and rallied from a low of $66.69 to a high of $69.42. 

USD/CAD technical analysis

The bears will need to break support as the prior lows near 1.2475 which will open prospects of a downside continuation if the same area holds as new resistance. 

On the other hand, should the US dollar and yields firm up again, the path of least resistance could well be on a break of the current resistance near 1.2600, in line with the prevailing bullish trend:


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended content

Recommended content

Editors’ Picks

EUR/USD falls below 1.0500 after US NFP data

EUR/USD falls below 1.0500 after US NFP data

EUR/USD dropped below 1.0450 but managed to stage a modest rebound. The US Dollar preserves its strength against its rivals and doesn't allow the pair to gain traction after the data from the US showed that Nonfarm Payrolls rose by 263,000 in November.


GBP/USD turns south on upbeat US jobs report, trades below 1.2200

GBP/USD turns south on upbeat US jobs report, trades below 1.2200

GBP/USD lost nearly 100 pips with the immediate reaction to the upbeat November jobs report from the US and broke below 1.2200. The US Dollar Index clings to strong daily gains above 105.00 after the data showed that Nonfarm Payrolls rose by 263,000.


Gold retreats below $1,790 as US yields surge on US NFP

Gold retreats below $1,790 as US yields surge on US NFP

Gold price turned south and dropped below $1,790 in the early American session. The benchmark 10-year US Treasury bond yield is up more than 2% on the day near 3.6% after the bigger-than-expected November job growth, weighing heavily on XAU/USD.

Gold News

FTX exchange collapse, loss of $3.1 billion could have been avoided on one condition

FTX exchange collapse, loss of $3.1 billion could have been avoided on one condition

FTX exchange, founded by Samuel Bankman-Fried (SBF), has consistently made headlines over the past month for its liquidity crisis and triggering a collapse in the crypto ecosystem.

Read more

AMC advances more than 3% in premarket day after being halted

AMC advances more than 3% in premarket day after being halted

AMC stock is up 3.4% in Friday's premarket just a day after authorities halted trading due to unusual volatility. Thursday saw options volume three times higher than the 20-day average.

Read more