• USD/CAD plummets after hitting a daily high near the 1.2900 mark.
  • July’s US Consumer Price Index (CPI) slows to 0% MoM.
  • Despite US inflation data, ING Analysts expect the Fed to hike 75 bps in September.
  • Fed’s Evans and Kashkari will cross wires late during the day.

The USD/CAD nosedives after a softer than estimated US inflation report, used by investors as an excuse to shift towards riskier assets, awaiting Fed policymakers which could pave the way towards the FOMC September monetary policy meeting. Consequently, mood improved, additionally spurred by China-Taiwan tussles tempering as the former announced the end of its military drills, but it will continue patrolling the Taiwan strait.

The USD/CAD is trading at 1.2762 after hitting a daily high at 1.2895, but better-than-expected US inflation data sent the dollar tumbling close to 1.50%, with the US Dollar Index dropping from 106.403 to 104.840.

USD/CAD sinks as US inflation eases

Before Wall Street opened, the Labor Department reported that US inflation in July rose by 8.5% YoY, less than the 9.1% in June and lower than the 8.7% estimate. Excluding volatile items like food and gas, it increased by 5.9%, less than forecasts, and aligned with June’s reading.

According to ING analysts, the report provides the “notion” that US headline inflation peaked, with gasoline prices down $1 a gallon from their highest in June. “We are forecasting the YoY rate dropping to 8.3%.” They added that core inflation would likely remain on its “upward trajectory” due to higher rental costs, services sector inflation pressures, and wages.

Analysts added, “we don’t see core inflation peaking until around September/October time with the core rate up at around 6.5% YoY by then.” Furthermore, they commented that they expect the Fed to tighten 75 bps.

The reasoning is that “…inflation remains far from the target, the economy added more than half a million jobs last month, and third-quarter GDP is set to rebound based on consumer movement data. Add to all that a positive contribution from net trade and a less negative drag from inventories then the case for a third consecutive 75bp Federal Reserve rate hike in September remains strong.”

In the meantime, the USD/CAD reacted downwards, plunging below 1.2800, further extending its losses, despite falling crude oil prices and the lack of Canadian economic data to be reported.

What to watch

An absent Canadian economic calendar would leave USD/CAD leaning on US data. The US docket will feature the Producer Price Index (PPI9 for July, alongside Initial Jobless Claims.

USD/CAD Price Analysis: Technical outlook

The USD/CAD extended its losses beyond the 20, 50, and 100-day EMAs, eyeing the 200-day EMA at 1.2739. Further accelerating its fall is the Relative Strength Index, crossing below the 50-midline and dropping under 42 readings, with some room to spare, before hitting oversold conditions. However, a break below the 200-DMA will expose the 1.2700 figure, followed by the June 10 daily low at 1.2680.

USD/CAD

Overview
Today last price 1.2759
Today Daily Change -0.0130
Today Daily Change % -1.01
Today daily open 1.2889
 
Trends
Daily SMA20 1.2895
Daily SMA50 1.2873
Daily SMA100 1.2791
Daily SMA200 1.2741
 
Levels
Previous Daily High 1.29
Previous Daily Low 1.2844
Previous Weekly High 1.2985
Previous Weekly Low 1.2768
Previous Monthly High 1.3224
Previous Monthly Low 1.2789
Daily Fibonacci 38.2% 1.2879
Daily Fibonacci 61.8% 1.2865
Daily Pivot Point S1 1.2855
Daily Pivot Point S2 1.2821
Daily Pivot Point S3 1.2798
Daily Pivot Point R1 1.2912
Daily Pivot Point R2 1.2935
Daily Pivot Point R3 1.2969

 

 

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