USDCAD moderately up to 1.3550 on Fed comments and yield hike

• Aggressively, comments from Federal Reserve officials propped up the dollar.
• US economic data was mixed, as jobless claims fell, while housing data paints a bleak picture.
• The Canadian Consumer Price Index on Wednesday failed to support the Loonie.
• USDCAD Price Analysis: Head and shoulders pattern intact unless exchange rates break above 1.3500.

The Loonie (CAD) It weakened against the US dollar (USD) after Federal Reserve policymakers said inflation remains too high and rates need to be above 5%, undermining investor sentiment. Factors such as the strong retail sales report on Wednesday in the United States (US) and the fact that jobless claims on Thursday fell below estimates justify further tightening by the Fed. At the moment of writing this report, the USDCAD trades at 1.3355.

Aggressive Fed Comments Undermined XAUUSD

US stocks were rocked by reiteration by Fed officials of the need to tackle inflation, led by St. Louis Fed President James Bullard. Bullard commented that the rate policy is not “restrictive enough” and said the Federal Funds Rate (FFR) would be in the 5-7% area, which spooked investors once the headline h. Cleveland Fed President Loretta Mester echoed her comments, saying inflation is too high.

The US housing market deteriorated further, while initial claims for jobless benefits fell

The US economic calendar was charged, with October housing starts contracting 4.2%m/m, down from last month’s 1.3% contraction, blamed on tightening of monetary conditions by the Federal Reserve . Building permits for the same period were down 2.4% mom, up from a 1.4% rise in September.

Later, initial US jobless claims for the week ending November 12 fell 222,000, disappointing estimates of 225,000 and the previous week’s 226,000. By contrast, Continuation Claims rose 13,000, to 1.51 million, in the week ending Nov. 5, rising for the fifth week in a row, an upward trend that signals Americans are out of work for longer.

Apart from this, the Dollar Index, a gauge of the dollar’s value against a basket of six currencies, rose 0.78% from its opening price of 107.109, underpinned by high US Treasury yields, with The US 10-year yield rose nine basis points to 3.771%, after hitting a weekly low of 3.671%.

Canada’s CPI failed to prop up the Loonie

An absent Canadian economic agenda left the Loonie adrift on the dynamics of the US dollar and the Consumer Price Index (CPI) report on Wednesday. Canadian CPI was unchanged at 6.9% yoy in October, due to higher energy and food prices. Core inflation rose, suggesting that the Bank of Canada (BoC) will not slow its pace of tightening. According to analysts at TD Valores Bursátiles, “we do not believe this report is enough to tip the balance towards a 50 basis point rise in December and we continue to expect a 25 basis point rise at the next meeting.”

USDCAD Price Analysis: Technical Perspective

The USDCAD daily chart shows a neutral trend. Traders should note that the head and shoulders chart pattern is intact unless USDCAD breaks above the 1.3500 signal. However, if USD buyers break above the psychological 1.3400 mark, a retest of the neckline around 1.3500 is likely. However, at the time of writing, USDCAD pulled back after testing the 1.3400 signal. USDCAD key resistance is at 1.3400, followed by the neckline at 1.3500. On the other hand, the first support for the USDCAD would be 1.3300, followed by the strong demand zone at the 100 day EMA at 1.3243, followed by 1.3200.