USD/CAD dives below the confluence of the 20-DMA and 1.3400 after soft US CPI

• USD/CAD drops towards fresh seven-week lows around 1.3340s after US CPI data.
• US CPI was lower than expected, while Initial Jobless Claims continued to show a robust labor market.
• The US Dollar continued to weaken across the board, dropping to 6.5-month lows.

USD/CAD erases some of its losses spurred by a cooler-than-expected US inflation report that dragged the major towards its current weekly low of 1.3347, though it has recovered some ground at the time of typing. Hence, the USD/CAD is trading at 1.3397, below its opening price by 0.34%.

USD/CAD extended its downtrend to four consecutive days

US equities wobbled following the release of US inflation data. The US Bureau of Labor Statistics (BLS) revealed the Consumer Price Index (CPI) for December ticked lower at -0.1% MoM, below estimates of 0%, while annually based dropped to 6.5% from November’s 7.1%. The so-called core CPI, which excludes volatile items like food and energy, was aligned with estimates of 0.3% MoM, while year-over-year data dipped to 5.7% YoY, below the 6% foreseen.

After the headline crossed newswires, the US Dollar (USD) tumbled across the board due to growing speculations that the Federal Reserve further slowdown the pace of interest rate hikes. Therefore, the USD/CAD dived toward its daily/weekly low at  1.3350

At the same time, the Bureau of Labor Statistics (BLS) revealed that Initial Jobless Claims for the last week came softer at 205K, less than the 215K petitions expected by analysts, showing the labor market resilience.

Elsewhere, Philadelphia’s Fed President Patrick Harker said that 25 bps would be appropriate going forward after the release of the US CPI report. Harker commented that the time for super-size rate hikes has passed and expects a few more rate increases this year.

USD/CAD Key Technical Levels