USD/CAD rebounds from 1.2450 back towards 1.2500 despite hotter than expected inflation and higher oil prices

USD/CAD has rebounded after briefly dipping below 1.2450 to near 1.2500 despite hotter than expected inflation and higher oil prices.
Technical support and fading momentum after good recent performance likely explain CAD’s struggles to keep pace with AUD and NZD.

Despite an upside inflation surprise that will likely trigger further speculation about a surprise BoC rate hike next week and further crude oil price upside on Wednesday, USD/CAD was not able to sustainably break below 1.2450. Indeed, the Canadian dollar lags its antipodean counterparts in terms of on-the-day performance and is currently up just 0.1% on the day against the buck versus gains of over 0.5% for the kiwi and Aussie.

The loonie difficulties to keep pace with its non-US dollar peers seem to be driven by technical buying in USD/CAD after the pair bounced at last week’s 1.2450 low, combined with a reluctance to break convincingly below the 200DMA, which resides at bang on 1.2500. At present, the pair trades just under 1.2500.

Waning momentum/difficulties to keep the bearish drive in USD/CAD alive shouldn’t be to surprising given the fact that, on the month, CAD is amongst the best performing G10 currencies and has already come a long way. USD/CAD is already lower by about 1.2% on the month and is over 2.0% below this month’s highs above 1.2800.

Technical support aside, however, with crude oil prices substantially above last week’s levels (when USD/CAD last tested 1.2450) and following further strong domestic data, the case for a lower USD/CAD remains strong. Traders well may see rallies as an opportunity to sell and even if the buck does continue to broadly strengthen this week, are unlikely to express bullish USD views against the loonie so long as the threat of a surprise BoC hike is on the table.

Suggestion:

Sell below 1.2520 for 1.2450 and 1.2420

Else

Buy above 1.2520 for 1.2540 and .2560

- share

View All

Usd/jpy Price Analysis: Extends Pullback From 10-dma Towards 129.00

Forex
2022, 18 May

Eur/usd: Sellers Could Come Back In Play In Case 1.05 Fails

Forex
2022, 18 May

Gbp/usd Extends Post-uk Cpi Decline, Flirts With 1.2400 Mark Amid Modest Usd Strength

Forex
2022, 18 May

MOST POPULAR

YaMarkets is a registered trademark of YaMarkets Limited.
www.YaMarkets.com is owned solely by YaMarkets Limited.
YaMarkets Limited is registered in St. Vincent & the Grenadine as an International Business Company with the registration number 26065 BC 2020.
YaMarkets Limited is authorized and regulated by the Vanuatu Financial Services Commission (VFSC) 14819
Registered Address: Suite 305, Griffith Corporate Centre, Kingstown P.O. Box 1510, Beachmont Kingstown St. Vincent and the Grenadines

RISK WARNING : Forex and CFDs are leveraged products and involve a high level of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent advice if necessary. Risk disclosure

IMPORTANT NOTICE : Any news, opinions, research, analyses, prices or other information contained on this feed are provided as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and therefore, it is not subject to any prohibition on dealing ahead of dissemination. We do not make any warranties about the completeness, reliability and accuracy of this market commentary. Past performance is not an indication of possible future performance. Any action you take upon the information on this feed is strictly at your own risk, and we will not be liable for any losses and damages in connection with the use of this feed.