- The selloff of the US dollar spreads despite US inflation exceeding 7%.
- Market participants expect the Fed’s first interest rate hike in March 2022.
- USD / CAD Technical Outlook: Bearish bias, but a daily close below the 200 DMA could keep CAD bulls in charge.
During the American session, the selloff of the US dollar continued after US consumer inflation data released on Wednesday showed that the CPI rose 7.0%. Traders would expect the US dollar to strengthen as it further consolidates the Fed’s first rate hike for March 2022, but based on market reaction it appears to be already discounted. At the time of writing this article, the USD / CAD it falls to new yearly lows, trading at 1.2461, a level last seen in November last year.
Meanwhile, light crude oil futures, up 0.07%, are at $ 82.70 per barrel, a tailwind for the oil-linked Canadian dollar.
Initial U.S. Unemployment Claims Rise, PPI Beats Estimates
Meanwhile, the US Department of Labor reported that initial jobless claims for the week ending January 7 increased by 230,000, up from 200,000. At the same time, prices paid by producers, better known as the December Producer Price Index on an annual basis, increased by 9.7%, one tenth below what was expected, which shows that price pressures could be under control.
Earlier, Philadelphia Fed Chairman Patrick Harker said he expected three rate hikes, followed by a reduction of his balance sheet of $ 8.7 trillion, in line with what Bostic, Mester, Daily and other policymakers have said. from the Fed on the week.
USD / CAD Price Forecast: Technical Outlook
The loonie strengthened against the dollar in the overnight session, extending the USD / CAD slide below the 200-day moving average (DMA), which stands at 1.2500. Therefore, USD / CAD is biased to the downside, based on technical analysis. However, a daily close below the 200 DMA would add downward pressure on the pair.
The first support for USD / CAD would be 1.2400. A breakout of the latter would keep CAD buyers hoping to extend into October 21 last year, daily low at 1.2288, but should first break below the November 10 cycle low at 1.2386, followed by 1.2300 .
On the contrary, the first resistance of the pair would be the 200 DMA at 1.2500. A break above would expose the Jan 12 daily high at 1.2580, followed by 1.2600 and then the 100 WFD at 1.2623.
Additional technical levels
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