USDCAD reverses previous losses and rises on geopolitical jitters

• The US Producer Price Index for October was softer than expected, which justifies Fed officials moderating rate hikes.
• Economic data from the United States dwarfed economic data from Canada.
• USDCAD Price Analysis: Struggles against the 100 day EMA, recovers to 1.3300 on geopolitical issues.

USDCAD rose towards 1.3335 during the North American session after dipping below 1.3300 on the release of a weak US inflation report. A weaker-than-expected October Producer Price Index (PPI) report bolstered sentiments. arguments from the Federal Reserve to moderate the rises. However the Geopolitical jitters sparked a risk-off impulse at the time of writingso the USDCAD is trading at 1.3322, above its opening price.

The US Department of Labor (DoL) revealed that the October Producer Price Index (PPI) rose 8% yoy, below the 8.3% forecast, while the so-called core PPI rose 6.7%. YoY, less than 7.1% expected. Late in the day, the New York Empire State Manufacturing Index showed conditions improved in the New York Fed area, rising 4.5 versus estimates for a -6 contraction.

The October inflation data in the United States is in the rear view mirror, which justifies the slowdown in interest rate hikes to the federal funds rate (FFR), as Fed officials said Federal (Fed). On Monday, Federal Reserve Board members Christopher Waller and Vice Chair Lael Brainard expressed that need, though Brainard stressed that the Fed has “extra work” to tame inflation.

Traders should be aware that although Fed policymakers are in favor of less aggressive monetary policy, they are still in a bullish cycle, so there is no Fed pivot yet. Unless they establish the path of where they expect the FFR to go and inflation continues its downward trend, further US dollar (USD) strength is expected.

On the Canadian side, September wholesale sales rose 0.1%, exceeding the 0.2% contraction estimated by economists, Statistics Canada reported. At the same time, Manufacturing Sales were flat in September after four consecutive months of declines.

USDCAD Price Analysis: Technical Perspective

That being said, USDCAD fell as it continued to target the head and shoulders pattern around 1.3030. However, the buyers are stomping around the 100 day EMA at 1.3234, which seems to be a tough nut to crack. Key resistance levels lie at 1.3400, followed by the 1.3500 psychological level, ahead of the 50-day EMA at 1.3525.