USD/CAD loses ground after hot PPI data from the US

USD/CAD bulls got rejected at the 200-day SMA and retreated near the 1.3420 area, still poised for a weekly gain
US PPI rose to 2.4% YoY in July, higher than expected.
Higher Oil prices help the CAD trade strong against most of its rivals.

Patricio Martín FXStreet

At the end of the week, the USD/CAD was rejected by the 200-day Simple Moving Average (SMA) at 1.3450 and settled near 1.3430. On the one hand, the USD is trading mildly stronger after hot Producer Price Index (PPI) from July figures which fueled a rise in American bond yields, while the CAD got a boost on the back of rising Oil prices.

Markets asses US inflation data and start to place bets on a hike by the Fed in November

US Producer Price Index from July came in higher than expected. The headline figure rose by 0.3% MoM to 0.8% YoY while the core measure advanced 0.3% MoM vs 0.2% expected to a yearly measure of 2.4%.

As a reaction, the US bond yields are seeing gains across the curve. The 10-year bond yield rose to 4.13%, while the 2-year yield stands at 4.87% and the 5-year yielding 4.25%, respectively. In that sense, higher yields can be attributed to investors placing higher bets on a 25 basis point (bps) hike in November’s Federal Reserve (Fed) meeting. As for now, and according to the CME FedWatch tool, those odds stand at 64% in favour of a no hike and nearly 30% in favour of a hike, vs last week's 25%. For the September meeting, the stronger case continues to be the Fed not hiking.

Other data released by the US by the University of Michigan indicated that its Sentiment index rose to 71.2, better than the 71 expected, while 5-year Consumer Inflation Expectations dropped to 2.9%.

On the other hand, Oil prices resumed their upwards path and as it is one of Canada’s main exports, higher energy prices strengthened the CAD. Data-wise, nothing relevant will be released on Friday for the Canadian economy.

USD/CAD Levels to watch

Analysing the daily chart, indicators point at a neutral to the bearish technical outlook for the USD/CAD, suggesting that the bulls are starting to give up. The Relative Strength Index (RSI) points downwards in the bullish territory, suggesting a possible trend reversal, while the Moving Average Convergence (MACD) prints lower green bars. On the weekly chart, the bullish outlook is more evident as the pair will record its fourth-consecutive weekly gain at the end of this session.

Support levels: 1.3350 (100-day SMA),1.3350, 1.3300.

Resistance levels: 1.3450 (200-day SMA), 1.3500,1.3550.

USD/CAD Daily chart

USD/CAD

Overview
Today last price	1.3438
Today Daily Change	-0.0011
Today Daily Change %	-0.08
Today daily open	1.3449

Trends
Daily SMA20	1.3269
Daily SMA50	1.3268
Daily SMA100	1.3391
Daily SMA200	1.3451

Levels
Previous Daily High	1.345
Previous Daily Low	1.3373
Previous Weekly High	1.3394
Previous Weekly Low	1.3151
Previous Monthly High	1.3387
Previous Monthly Low	1.3093
Daily Fibonacci 38.2%	1.3421
Daily Fibonacci 61.8%	1.3402
Daily Pivot Point S1	1.3398
Daily Pivot Point S2	1.3346
Daily Pivot Point S3	1.332
Daily Pivot Point R1	1.3475
Daily Pivot Point R2	1.3502
Daily Pivot Point R3	1.3553

Author

Patricio Martín

FXStreet

Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.

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