USD/CAD Bearish Under 1.3585 Amid Stronger US CPI Update

In the early Asian session on Wednesday, the USD/CAD pair exhibited a bearish correction, hovering around 1.3550, influenced by the latest US Consumer Price Index (CPI) inflation data for January.

This data has contributed to an uplift in the US Dollar and bond yields, positioning the USD/CAD near 1.3568, with a marginal decline of 0.01% for the day.

US Inflation Data Fuels USD Strength

The US Bureau of Labor Statistics released data indicating a decrease in CPI inflation to 3.1% year-over-year in January from December’s 3.4%, surpassing the anticipated 2.9%. Furthermore, the Core CPI, excluding food and energy, saw a rise to 3.9%, exceeding expectations of 3.7%.

On a monthly scale, CPI and Core CPI experienced increases of 0.3% and 0.4%, respectively.

Canadian Labor Market and Monetary Policy

Unexpectedly robust Canadian labor market data, showcasing a 37,000 job increase—more than double the forecasts—paints a promising picture of the labor market.

This development could lead the Bank of Canada (BoC) to reconsider its rate cut projections, potentially delaying them from April to June. At its January meeting, the BoC maintained the policy interest rate at 5.0%.

Governor Tiff Macklem highlighted a shift in focus from the adequacy of current interest rates to the duration for which they should be sustained. However, a specific timeline for rate reductions remains unspecified.

Upcoming Economic Indicators and Speeches

Market participants are poised to monitor forthcoming Canadian Housing Starts data and speeches by Fed officials Goolsbee and Barr. Additionally, the Retail Sales and Producer Price Index (PPI) reports, scheduled for release on Thursday and Friday, respectively, are anticipated to provide further clarity on the USD/CAD pair’s direction.

Moreover, remarks from Governor Council Member Mendes will be closely observed for any new insights into monetary policy decisions.

USD/CAD Price Forecast

As of February 14, the USD/CAD pair is experiencing a slight decline, currently trading at 1.35549, marking a 0.06% decrease. Positioned below its pivot point of 1.35868, the pair indicates a bearish sentiment in the near term.

It encounters immediate resistance levels at 1.36061, 1.36239, and 1.36405, which could challenge any upward movements.

Conversely, support is established at 1.35521, with further levels at 1.35311 and 1.35136, offering potential stabilization points.

The Relative Strength Index (RSI) stands at 65, suggesting a leaning towards overbought conditions. The 50-day Exponential Moving Average (EMA) at 1.34801 supports a cautiously bullish outlook over a longer period.

However, the current positioning below the pivot suggests that the USD/CAD may continue to face downward pressure, making any recovery attempts critical to watch for potential reversals or continued bearish trends.