Usdcad rises as Canadian inflation points to stronger loonie, US manufacturing outlook boosts dollar

USDCAD Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	0.3%	42 Pips
Week to-date	0.35%	50 Pips
February	-1.79%	-259 Pips

Upcoming key events (London Time)

No major events for the day.

What happened lately

In the United States, the building permits increased slightly in January to 1.483 million from 1.482 million in December, indicating a marginal uptick in future construction activity. However, housing starts saw a decrease to 1.366 million from the revised 1.515 million in December, reflecting a potential slowdown in new residential construction. On a brighter note, the New York Empire State Manufacturing Index showed significant improvement, climbing to 5.7 points in February from a negative 12.6 points in January, suggesting positive sentiment and potential growth in manufacturing activity.

In Canada, several indicators depict an upward movement in inflation. The overall Consumer Price Index (CPI) inflation rate rose to 1.9% in January from 1.8% in December. In terms of monthly changes, the CPI increased to 0.1% in January from a negative 0.4% in December, implying a rebound from deflationary pressures. Additionally, the Bank of Canada’s Core CPI inflation rate rose to 2.1% annually in January from 1.8% in December, with the monthly rate also improving to 0.4% from negative 0.3%. This sustained rise in inflation may hint at possible monetary policy measures to curb inflationary pressures.

Regarding the USDCAD exchange rate, the recent economic data suggests varied implications. The rise in Canadian inflation could signal a stronger Canadian dollar as markets anticipate potential rate hikes by the Bank of Canada to control inflation. Conversely, the improving U.S. manufacturing outlook as demonstrated by the Empire State Manufacturing Index, despite a mixed housing market, suggests a robust economic environment favoring the U.S. dollar. However, on Wednesday, USDCAD rose by 0.3% to 1.42340, indicating a stronger U.S. dollar amidst these conditions. Moving forward, without scheduled major events, the currency pair may continue to be influenced by investor sentiment and shifts in economic indicators, with particular attention to inflation trends and policy responses in both countries.

Latest from X (Twitter)

Tweets by Statistics Canada

What can we expect from USDCAD today?

USDCAD on Wednesday rose 0.3% to 1.42340. Price is below 9-Day EMA while Stochastic is rising.

Updated daily direction for USDCAD looks bullish as the pair ended higher after Wednesday trading session.

Looking ahead for the day, immediate upside resistance level is R1 at 1.42627 with break above could target R2 at 1.42913 or figure level area. While towards the downside, we are looking at daily low of 1.41710 as an important support. Break below this level could weaken the current bullish momentum. A break above 1.42455 may suggest continuation after recent positive movement.

For the week to-date, take note that USDCAD is mixed as compared to the prior week.

Key levels to watch out:

#USDCAD Trending on Twitter

[custom-twitter-feeds hashtag=”#USDCAD” num=3 showheader=false]