The U.S. dollar is trading lower against the Loonie ahead of the U.S. PPI release!
Will USD/CAD draw in enough buyers to extend its January uptrend before the week ends?
Before moving on, ICYMI, yesterday’s watchlist looked at USD/JPY’s short-term uptrend ahead of the U.S. CPI release. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. CPI for December: 3.4% y/y (3.1% y/y forecast/previous); Core CPI at 3.9% y/y as forecasted vs. 4.0% y/y previous; the m/m rate was strong at 0.3% m/m (0.1% m/m forecast/previous)
U.S. Initial Jobless Claims: 202K (209K forecast; 203K previous)
ECB President Lagarde in an interview with France 2 TV: “I think that rates, barring any further shocks or unexpected data, will not continue to go up.“
Japan’s annual bank loans grew by 3.1% in December against 2.7% y/y estimates, 2.8% y/y growth in November
Japan’s current account surplus for November: 1.89T JPY (2.18T JPY forecast, 2.62T JPY previous)
Crude oil higher by as much as 2.5% as the U.S. and its allies launched joint military strikes against Houthi rebels in Yemen
U.K.’s economy grew by 0.3% m/m in November after an upwardly revised 0.3% m/m uptick in October with services output (0.4% m/m) as the main contributor
U.K.’s industrial production in November: 0.3% m/m as expected (-1.3% m/m previous)
France’s household consumption in November: 0.7% m/m (-0.1% m/m forecast, -0.9% m/m previous)
Price Action News
Overlay of CAD vs. Major Currencies Chart by TradingView
Crude oil prices traded higher on Friday after the U.S. and Britain launched joint military strikes against Houthi rebel targets in Yemen following the movement’s attacks in the Red Sea.
Not surprisingly, the oil-related Canadian dollar benefited from the uptick in oil prices.
CAD is trading the strongest against CHF, EUR, and GBP and is registering the least gains against NZD, JPY, and AUD.
Meanwhile, optimism over future Fed interest rate cuts kept risk assets afloat against the “safe haven” counterparts.
Upcoming Potential Catalysts on the Economic Calendar:
U.S. core PPI reports at 1:30 pm GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ️
USD/CAD: 15-min
USD/CAD 15-min Forex Chart by TradingView
As mentioned above, the Canadian dollar gained pips against its major counterparts after escalating tensions in the Middle East lifted crude oil and the oil-related Loonie higher in the charts.
USD/CAD, in particular, was hit by a one-two punch of higher oil prices and traders pricing in Fed interest rate cuts despite stickier-than-expected high inflation data in the U.S.
Has the pair seen its intraday lows today? Or are the bears just getting started?On a technical basis, USD/CAD halted its downswing at today’s S1 (1.3350) Pivot Point level. The psychological area is also not far from an ascending channel support AND has been a key inflection point for the pair in January.
Last but not least, USD/CAD is trading about 37 pips from its open prices, almost exactly half of the 67-pip full average daily volatility for USD/CAD.
A move back to the channel and to the 1.3385 levels may be on the table if the escalating tensions in the Middle East translate to overall risk aversion in the U.S. session. USD/CAD may also see another upswing if today’s U.S. PPI reports support “higher for longer” bets for the Fed.
Look out for bullish candlesticks that may draw in buyers and keep USD/CAD inside its ascending channel. Then, depending on USD’s potential bullish momentum, the 1.3380 previous resistance and 1.3400 mid-channel and psychological level may attract intraday profit-takers.
How about you? Do you see USD/CAD bouncing higher in the next couple of hours? Or are we looking at the start of a short-term bearish breakout?
