USD/CAD continues to trade below 1.31 following Canada's inflation report

Annual CPI in Canada jumps to 3% in July.
Consumer confidence in the U.S. dips to its lowest level in 11 months.
The pair is down more than 50 pips on the week.

Eren Sengezer FXStreet

By erasing more than 50 pips in a matter of minutes after the Statistics Canada's inflation report, the USD/CAD pair touched a session low at 1.3068. Although the pair recovered a portion of its losses in the next hour, it failed to break above the 1.31 mark and was last seen trading at 1.3082, losing 0.6% on the day.

Today's data from Canada showed that the annual-CPI jumped to 3% in July from 2.5% in June to beat the market expectation of 2.5%. Moreover, the BoC's core-CPI rose to 1.6% to surpass the analysts' estimate of 1.3%. The faster-than-expected growth in inflation ramped up the expectations of the BoC sticking with its hawkish monetary policy and provided a boost to the loonie.

On the other hand, the University of Michigan said that the headline confidence index of its Consumer Sentiment Survey eased to its lowest level since September 2017 at 95.3. The report highlighted that consumers were showing a worse than expected reaction to rising prices in the U.S. The US Dollar Index, which looked to be stabilizing near the 96.50 mark during the European session, came under a renewed bearish pressure and was last seen down 0.35% on the day at 96.26.

Technical outlook

With today's fall, the RSI indicator on the daily chart returned to the 50 area to suggest that buyers are losing control of the price action. The pair could face the first support at 1.3065 (daily low/20-DMA) ahead of 1.3025 (100-DMA) and 1.2960 (Aug. 7 low). On the upside, resistances align at 1.3100 (psychological level), 1.3135 (50-DMA) and 1.3190 (Jul. 24 high).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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