The Canadian dollar continues to struggle. In the North American session, USD/CAD broke above the 1.29 level for the first time since August. The Canadian dollar has not recorded a winning day since Dec. 7.
Canada’s inflation within expectations
The Canadian dollar had a muted reaction to Canada’s inflation report for November. Annual CPI climbed 4.7% y/y, unchanged from the October release and matching the consensus. The BoC Core CPI measure, the central bank’s preferred inflation indicator, slowed to 3.6% y/y as expected, down from 3.8% in October.
The inflation data didn’t help the struggling Canadian dollar. USD/CAD was up 1.34% this week and could gain more ground after the FOMC's hawkish pivot at Wednesday's policy meeting. The markets were expecting some drama at the meeting, with the Fed widely expected to double the pace of its monthly taper from USD 15 billion to 30 billion. This means that the Fed’s bond purchase scheme are to end in March instead of July, setting the stage for a Fed rate hike in mid-2022.
Overshadowed by the FOMC meeting was the release of US Retail Sales for November. The data was soft, with the headline release rising by just o.3% m/m, shy of the 0.8% consensus and well below the 1.8% gain in October. It was a similar story for Core Retail Sales, which was also up 0.3% and missed expectations.
USD/CAD Technical
- USD/CAD has support at 1.2618. Below, there is a monthly support line at 1.2477
- The pair is testing resistance at 1.2666. Above, there is resistance at 1.2898