- The USD / CAD witnessed some intraday selling and was down for the second day in a row.
- The USD witnessed some profit-taking following the release of mixed US inflation data.
- A further drop in crude oil prices undermined the loonie and helped limit the decline.
The pair USD / CAD It fell below the key psychological level of 1.2500 due to the reaction to the mixed US consumer inflation figures, although it lacked subsequent sales.
The pair struggled to capitalize on its modest intraday gains, instead finding fresh supply near the 1.2550 region and lower during the early days of the American session. This marked the second day in a row of a negative move and was sponsored by a modest decline in the US dollar following the release of mixed US consumer inflation figures.
The headline CPI slowed to 0.5% in July from a 0.9% rise in the previous month. In addition, the core CPI, which excludes food and energy prices, rose 0.3% month-on-month compared to 0.4% expected and 0.9% in June. This, coupled with comments from Richmond Fed Chairman Thomas Barkin, sparked some profit-taking from the USD and put pressure on the USD / CAD pair.
The dollar was further affected by comments from Richmond Fed Chairman Thomas Barkin, who said it could take a few more months for the US labor market to recover long enough for the Fed to reduce its support for the economy in the era of the crisis. This, coupled with a modest pullback in US Treasury yields and a positive risk tone, further undermined the safe-haven dollar.
The USD / CAD pair extended the previous day’s rejection drop from the very important 200-day SMA, although a new leg to the downside in crude prices helped limit any further losses. Oil prices fell sharply after the United States urged OPEC and its oil-producing partners to boost production. This, in turn, undermined the commodity-linked loonie and offered some support to the pair.
As investors continue to update their bets on when the Fed will begin to reduce its stimulus, it will be interesting to see if the USD / CAD pair can attract buying at lower levels. However, repeated failures near a technically significant moving average warrant some caution before positioning for any significant appreciation move.
Technical levels
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