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USD/CAD hits two-week lows below 1.2500

  • USD/CAD fell to two-week lows on Wednesday, shedding around 1.0% from near its 200 DMA from above 1.2600 to below 1.2500.
  • The USD underperformed, driving much of the move, although higher-than-expected Canadian CPI figures also helped weigh on the pair.

The USD/CAD fell to two-week lows on Wednesday, losing roughly 1.0% on the day from near its 200-day moving average just above 1.2600 to just below the 1.2500 level, with bears now eyeing a test of the lows yearly this month about 1.2400.

Another catalyst for the USD/CAD decline on Wednesday was higher-than-expected Canadian consumer price inflation figures for March, which saw the year-over-year rate of growth in headline prices accelerate to 6.7% from 5.7 % in February. All core measures also recorded larger-than-expected month-on-month and year-over-year jumps. The racy numbers helped boost expectations that the BoC will follow up last week’s 50bp rate hike with more hikes of a similar spread in upcoming meetings.

Indeed, the BoC is expected to maintain its lead on Fed monetary tightening this year, making the Canadian dollar less vulnerable than some of its G10 counterparts to strength as a result of line expectations. Fed tough. If global commodity prices remain elevated in the coming weeks and months as a result of the ongoing Russo-Ukrainian war, this should strengthen the case for an eventual break below 1.2400.

In the more immediate future, USD/CAD focus now shifts to comments from Fed Chairman Jerome Powell on Thursday, which is expected to solidify expectations of 50bp rate hikes at upcoming Fed meetings. , which could support the dollar. Attention then turns to Canadian retail sales figures for March and the results of the US April PMI survey on Friday.

Technical levels

Source: Fx Street

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