Canadian Dollar Trades in Tight Range vs. USD Ahead of US CPI
Canadian Dollar Holds Steady Against US Counterpart
The Canadian Dollar maintained a narrow range against its US counterpart, as traders anticipated tomorrow’s US CPI report. The market is awaiting crucial impetus from the upcoming release, with the loonie facing pressure from sliding crude prices due to a surprise build in US inventories.
Support From Risk-Sentiment and Equities
The CAD gained some support from an uptick in risk-sentiment, as reflected in equities. However, the commodity linked loonie faced pressure from sliding crude prices, following a surprise build in US inventories.
US Dollar Modestly Weaker Against Major Currencies
The US dollar was modestly weaker against a basket of major currencies, with trading relatively quiet ahead of tomorrow’s CPI release. The headline reading is forecast to come in at 3.2% YoY, above the previous month’s 3.1% print.
Market Expectations and Technical Analysis
Despite forecasts from the Federal Reserve for only 75 bps of easing next year, markets are currently betting on lower Fed rates that will help CAD extend recent modest gains. On a technical level for the pair, analysts at FXStreet note that a pullback could see the pair heading back into December’s lows near the 1.3200 handle.
Interest Rate Sensitivity
The loonie should be particularly reactive to interest rate shifts, given that the most interest rate sensitive developed-economy currencies are the ones sensitive to housing. Analysts at SocGen note that lower Fed rates will help CAD extend recent modest gains.
Outlook and Predictions
Looking ahead for the pair, analysts at SocGen note that lower Fed rates will help CAD extend recent modest gains. Daily candlesticks have the bid facing a slowdown of bullish momentum from the 1.3400 handle, and a technical ceiling is forming up near 1.3500 as the 50-day SMA heads for a bearish cross of the 200-day SMA.
