Canadian Dollar Trades in Tight Range vs. USD Ahead of US CPI
The Canadian Dollar traded in a tight range against its US counterpart as markets eagerly awaited tomorrow’s inflation data. Investors are eyeing the upcoming release of the US Consumer Price Index (CPI) for December, which is expected to give impetus to the currency pair.
Loonie Supported by Risk Sentiment, Faces Pressure from Sliding Crude Prices
The Canadian Dollar received some support from an uptick in risk sentiment, as reflected in the equities market. However, the loonie faced pressure from sliding crude oil prices, which dropped following a surprise build in US inventories. This decline in oil prices has had a negative impact on the commodity-linked Canadian Dollar.
Traders Await U.S. CPI Report for December as USD-CAD Trades in Narrow Range
Traders are exhibiting caution and refraining from making any major moves as they await the US CPI report for December. The USD-CAD pair has traded in an extremely narrow range as market participants patiently anticipate the key economic data. Michael Goshko, senior market analyst at Convera Canada ULC, noted that the tight range reflected traders’ hesitation as they look for guidance from tomorrow’s CPI report.
Lower Fed Rates Expected to Benefit CAD, Analysts Say
Analysts at Societe Generale (SocGen) note that lower interest rates from the Federal Reserve will likely boost the Canadian Dollar and allow it to extend its recent modest gains. They also point out that the Canadian Dollar is particularly sensitive to interest rate shifts, as it is influenced by the housing market. With the Fed expected to maintain lower rates, the loonie could see further appreciation.
Technical Analysis Suggests Potential Pullback for USD-CAD Pair
From a technical perspective, analysts at FXStreet observe that the USD-CAD pair is facing a slowdown in bullish momentum after reaching the 1.3400 handle. There is a technical ceiling forming near 1.3500 as the 50-day simple moving average (SMA) heads for a bearish cross of the 200-day SMA. With upside potential capped, they anticipate a potential pullback that could lead the pair back to December’s lows near the 1.3200 handle.
Overall, the Canadian Dollar is trading in a tight range against the USD ahead of the US CPI report for December. Traders are closely monitoring the economic data for guidance, while also keeping an eye on risk sentiment and oil prices. Lower interest rates from the Fed are expected to benefit the loonie, but technical analysis suggests a potential pullback in the near term.
Analyst comment
Positive news: Lower Fed rates expected to benefit CAD, analysts say
Negative news: Loonie faced pressure from sliding crude prices
As an analyst, the market is expected to show caution and hesitation as traders await the US CPI report. The Canadian Dollar may benefit from lower interest rates and positive risk sentiment, but the decline in oil prices could have a negative impact. Technical analysis suggests a potential pullback in the near term.
