USD/CAD spikes up to mid-1.25s post-US CPI data

  • Core-CPI rises 0.3% on a monthly basis in December.
  • Retail sales data come in line with expectations.
  • WTI consolidates gains below $64.

The USD/CAD pair gained traction and added nearly 50 pips in a matter of minutes with the initial reaction to the macroeconomic data releases from the United States. After rising 1.2555, however, the pair lost its momentum and was last seen trading at 1.2530, where it was up 0.08% on the day.

According to the data released by the U.S. Bureau of Labor Statistics, inflation, measured by the core Consumer Price Index, rose 0.3% on a monthly basis in December, beating the market expectation of 0.2% and lifting the annual rate up to 1.8% from 1.7%. A separate report on Friday showed that following November's 0.9% increase, retails sales grew by 0.4% in December, coming in line with the experts' estimate.

Meanwhile, following the impressive rally to a fresh three-high on Thursday, crude oil prices went into a consolidation phase on the last day of the week, not allowing the commodity-sensitive loonie to gather enough strength to pull the pair down into the negative territory. At the moment, the barrel of West Texas Intermediate is trading at $63.40, losing 0.6% on the day.

Later in the session, Business Inventories and IBD/TIPP Economic Optimism Index from the U.S. will be looked upon for fresh impetus. Before markets wrap up the week, Boston Fed President Rosengren is going to deliver a speech as well.

Technical levels to consider

The pair could encounter the first technical resistance at 1.2635 (100-DMA) ahead of 1.2710 (50-DMA) and 1.2800 (psychological level/Dec. 22 high). On the downside, supports align at 1.2500 (psychological level), 1.2430 (Jan. 10 low) and 1.2355 (Jan. 5 low).

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