- US inflation continues to fall, as ICE showed, sparking talk of a Fed pivot.
- The Canadian economy stagnated and grew at a rate of 0.1% in December.
- USD/CAD Price Analysis: It is likely to extend its downtrend and test the 200 day EMA.
The USD/CAD The US dollar (USD) fell back on Tuesday, as the US dollar (USD) extended its losses after a report from the US Department of Labor (DoL) showed that employment costs had cooled. At the same time, the Canadian economy grew on schedule. Therefore, the USD/CAD pair is trading at 1.3319 after reaching a daily high of 1.3471.
US data weighed on the dollar and boosted the CAD
The dollar continued its downward trend, weighed down by the US Employment Cost Index (ECI), which measures the remuneration of workers, which slowed down after registering 1.2% and stood at 1%, below from estimates of 1.1%. Following the data release, the dollar pared some of its earlier gains against most of the G8 currencies, particularly against the Loonie (CAD). There is speculation that the US Federal Reserve (Fed) could pause after the February and March meetings, as another inflation gauge revealed data last week showing that the downward trend in inflation extended to four consecutive months. Meanwhile, financial analysts estimate that the US Fed would stop raising rates once they peak at 4.75% at 5%.
At the same time, Statistics Canada revealed that the economy grew at a rate of 0.1% in December, unchanged from November data. In annual terms, the Gross Domestic Product (GDP) probably increased 1.6% in the fourth quarter. If the preliminary estimate proves correct, the economy will expand by 3.8% in 2022 compared to the previous year, above the central bank’s forecast of 3.6%.
In view of the above, the USD/CAD pair pulled back from the daily highs and extended its losses towards 1.3340, while the Dollar Index, an indicator to measure the value of the dollar against six pairs, fell 0.13% and held above 102.00 for the second day in a row.
The US economic agenda will publish the S&P Global and ISM manufacturing PMIs, as well as the decision of the US Federal Reserve (Fed). If the Fed is dovish, the USD/CAD pair could weaken and extend its losses below 1.3300.
USD/CAD Technical Analysis
The USD/CAD candle on Tuesday shows that the trading range has been wide throughout the session. Even though the pair recaptured the 20 and 50 day EMAs, each at 1.3406 and 1.3457, it fell sharply below both and formed a candlestick with a sizeable wick up, suggesting that sellers are in charge. Therefore, the first support for USD/CAD would be the prior year low at 1.3300, followed by the 200 day EMA at 1.3255, before sliding towards the psychological level of 1.3200. On the other hand, if the USD/CAD buyers recapture 1.3400, a test of the 100 day EMA is in store.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
