USDCAD moderately climbs to 1.3550s on hawkish Fed commentary, US yields rise

• Hawkish commentary by Federal Reserve officials underpinned the US Dollar.
• US economic data was mixed as unemployment claims dropped, while housing data paints a gloomy scenario.
• Wednesday’s Canadian Consumer Price Index failed to underpin the Loonie.
• USDCAD Price Analysis: The head-and-shoulders pattern is intact unless exchange rates clear 1.3500.

The Loonie (CAD) weakened against the US Dollar (USD) after Federal Reserve policymakers expressed that inflation remains too high and rates need to be above the 5% threshold, undermining investors’ sentiment. Factors like Wednesday’s solid Retail Sales report in the United States (US) and Thursday’s claims for unemployment dropping below estimates justify further Fed tightening. At the time of writing, the USDCAD is trading at 1.3355.

Federal Reserve’s hawkish commentary undermined XAUUSD

US equities were rattled by Fed officials reiterating the need to tackle inflation, led by the St. Louis Fed President James Bullard. Bullard commented that the policy rate is not “sufficiently restrictive” and said that the Federal Funds rate (FFR) would be in the area between 5% to 7%, which spooked investors once the headline crossed wires. Cleveland’s Fed President Loretta Mester echoed his comments, saying that inflation is too high.

US housing market deteriorated further, while Initial Jobless Claims dropped

The US economic calendar was busy, with Housing Starts for October contracting 4.2% MoM beneath the last month’s 1.3% contraction, blamed on the Federal Reserve tightening monetary conditions. Building Permits for the same period shrank 2.4% MoM vs. September’s 1.4% increase.

Later, US Initial Jobless Claims for the week ended on November 12 dropped 222K, below estimates of 225K and the previous week’s 226K. Contrarily Continuing Claims rose 13K, to 1.51 million, in the week ended on November 5, increasing for the fifth straight week, an uptrend signing that Americans are out of work for longer.

Aside from this, the US Dollar Index, a gauge of the buck’s value against a basket of six currencies, remains above its opening price by 0.78%, at 107.109, underpinned by high US Treasury yields, with the US 10-year note rate raising nine bps, at 3.771%, after hitting a weekly low of 3.671%.

Canada’s CPI failed to underpin the Loonie

An absent Canadian economic docket left the Loonie adrift to the dynamics of the US Dollar and Wednesday’s Consumer Price Index (CPI) report. Canada’s CPI was unchanged at 6.9% YoY in October, blamed on higher energy and food prices. Core inflation edged up, suggesting that the Bank of Canada (BoC) would not decelerate its tightening pace. According to TD Securities analysts, “We don’t think this report is enough to single-handedly tip the scales towards a 50bp hike in December and continue to look for a 25bps at the upcoming meeting.

USDCAD Price Analysis: Technical outlook

The USDCAD daily chart portrays the major as neutral biased. Traders should be aware the head-and-shoulders chart pattern is intact unless the USDCAD clears the 1.3500 mark. However, if USD buyers breach the psychological 1.3400 figure, a re-test of the neckline around 1.3500 is likely. Nevertheless, at the time of typing, the USDCAD retraced after testing the 1.3400 mark. USDCAD key resistance lies at 1.3400, followed by the neckline at 1.3500. On the flip side, USDCAD’s first support would be 1.3300, followed by the solid demand zone at the 100-day Exponential Moving Average (EMA) at 1.3243, followed by the 1.3200 mark.