USD/CAD Advances To Six-Week High Following Canadian CPI Miss

Disappointing Canadian inflation figures sent USD/CAD to fresh highs for the week and to trade at the highest level since March 10th. The loonie has been the weakest currency among its major counterparts this week, falling about 1.4% against the greenback during the period.

Consumer prices in Canada rose 0.2% last month, falling short of the analyst consensus for a gain of 0.4%. Annually, CPI was reported to rise 1.6% versus an expected gain of 1.8% and a prior reading of 2.0%.

There was an immediate rise in USD/CAD following the data release to fresh weekly highs. The pair pulled back just ahead of the European close falling short of testing resistance at 1.3532 which marks the March high.

The US dollar index (DXY) recovered for a second session after finding support at the December spike low of 99.43 on Thursday. The psychological 100.00 handle has proven to be a hurdle in the recovery and the index is seen consolidating below it throughout the North American session.

WTI crude oil prices (USOIL) turned lower after a small recovery on Thursday. Oil prices have declined in five out of the past seven sessions and recoveries during the time have been minimal. USOIL was last seen falling through the psychological $50.00 price point to trade at $49.61 for a loss of 2.61% on the day and a drop of 6.23% for the week thus far.

This week’s decline has wiped out over two weeks of gains and as a result, a bearish engulfing weekly candle suggests rallies next week will be short-lived. Support is seen at a rising trendline that connects April lows with August lows which currently falls at around $48.60.

Upside momentum in USD/CAD has been strong and has resulted in a break of a weekly range. On a weekly chart, the pair is set to close at the highest level since December.

A horizontal level at 1.3437 marks the November monthly close and is considered important. The level held the exchange rate lower in the week ahead of the BoC meeting but the pair sliced through it this week.

This week’s developments point to a clear bullish trend in USD/CAD and hints of a continuation of the bullish trend seen from May 2016.

In the fourth quarter of 2016, a 50% Fibonacci retracement measured from the multi-year high in USD/CAD to the low in May had held the pair lower. It falls at 1.3575, close to the November high of 1.3588. This area is the next target for the currency pair. The first level of support falls at the November monthly close of 1.3437.

USD/CAD Daily Chart

USDCAD Daily April 21

Jignesh is an analyst and trader, specializing in currencies and commodities. He utilizes a macro view as well as a proprietary method of pattern recognition that is based on the principles of Elliott wave. His focus is to assess strength in trends, and perceiving high potential turning points in the markets. He brings over 4 years of experience in his current role.