USD/CAD struggles to defend the 1.2500 threshold after it became an exception to the G10 currency pairs that slumped versus the US dollar rally the previous day. That said, the quote seesaws near 1.2515 during the initial hours of Wednesday’s Asian session.
In doing so, the quote justifies strong prices of Canada’s main export item WTI crude oil as well as the rising bets on the Bank of Canada (BOC) rate lift ahead of the BOC Consumer Price Index (CPI) data.
That said, WTI crude oil prices rose to the highest since October 2014 while closing around $85.84 at the end of Tuesday’s North American trading session. The oil benchmark not only cheered hopes of economic recovery but also benefited from geopolitical tensions between Russia and Ukraine.
Elsewhere, interest rate futures hint at 70% probabilities favoring the BOC to announce a rate hike during the next week’s monetary policy meeting. However, that makes today’s inflation data all the more important. Forecasts suggest that the key BOC CPI Core ease to 3.5% versus 3.6% prior while the headlines Consumer Price Index for December may rise to 4.8% from 4.7% previous readouts.
It should be noted that the US Dollar Index (DXY) jumped the most since January 03 the previous day as the Treasury bond yields jumped to early 2020 days amid escalating hopes of faster rate hikes by the Federal Reserve. Adding to the bullish bias are worsening virus conditions and Russia-Ukraine tussles.
Talking about data, NY Empire State Manufacturing Index slumped to negative for the first time in two years, -0.7 versus 25.7 expected and 31.9 prior. Further, US NAHB Housing Market Index eased to 83 versus 84 market forecasts and previous readouts. At home, Canada Housing Starts declined below 270K expected to 236.1K, versus upwardly revised 303.8K prior.
Moving on, the USD/CAD pair may remain range-bound as both, namely the USD and the CAD, are the biggest winners of the G10 currencies and oil prices have fewer hurdles to the north on crossing the $85.00 hurdle. In addition to the Canadian data, US housing market numbers and virus updates will also be important to watch for clear direction.
Although the 100-DMA and a monthly resistance line restrict the short-term upside of the USD/CAD prices respectively around 1.2620 and 1.2635, the bears need to conquer the 200-DMA and an upward sloping support line from June, close to 1.2500 and 1.2460 in that order to excel.
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