- The USD/CAD is trading around the 1.35175 ratio as this writing, this after touching the 1.35300 level earlier in the morning.
- Yesterday’s stronger than expected inflation data from Canada via the Consumer Price Index figures did not help the perspectives of financial institutions or speculators.
- Nervous trading has been rather abundant since the New Year has begun; the USD/CAD has correlated to the broad Forex market as the USD has gained strength.
However, yesterday’s CPI numbers from Canada adds a bit of anxiety into the USD/CAD, which has certainly already existed due to USD centric buying as financial houses have shown some caution as 2024 has started. The inflation data from Canada which came in with a surprisingly strong outcome highlights a rather weak domestic economy. The word stagflation comes to mind considering the prospect of stubborn inflation and lack of growth in Canada via GDP.
USD/CAD Risk Appetite in a USD Centric World
The USD/CAD pair's price was trading near the 1.32400 level on the 2nd of January. The ability of the currency pair to demonstrate a solid climb higher has happened via the power of a stronger USD since the start of the New Year. Yesterday’s inflation data from Canada is important and needs to be noted, but the USD/CAD also remains locked in a USD centric mode like most other major currency pairs.
The U.S will release Retail Sales data today and the outcome is expected to be very close to last month’s results. If the U.S data comes in as anticipated, then Forex will again focus of near-term risk appetite which remains in view but has certainly turned a bit cautious. The USD/CAD is still below important resistance levels seen in the middle of December.
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Speculative Approach in the USD/CAD and Caution
Traders who believe the USD/CAD has been overbought may believe selling opportunities lurk in the currency pair. However, speculators should remain conservative in the near-term. Useful barometers for the USD/CAD may prove to come from U.S Treasury yields. If the yields show some declines this would point to potential USD weakness developing, but U.S bond traders appear cautious and this may continue over the next couple of days as some type of positive impetus is awaited which would trigger additional optimism.
- USD/CAD trading this morning tested important resistance levels which did produce a reversal lower.
- However, choppy conditions may remain a part of Forex today and continue to be seen throughout the week.
- Traders who want to pursue the USD/CAD may benefit from quick hitting tactics as a safeguard.
Canadian Dollar Short Term Outlook:
Current Resistance: 1.35250
Current Support: 1.35090
High Target: 1.35430
Low Target: 1.34895
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