USD/CAD cleared part of daily losses but closes in the red

• The USD/CAD fell to a low of 1.3145 and then settled at 1.3185, closing with losses.
• BoC hiked rates by 25 bps, as expected.
• The US reported lower-than-expected inflation figures from June.

The Lonnie traded with strong gains agains the USD on Wednesday following the Bank of Canada’s announcement of a 25 basis points hike and soft inflation figures from the US. However, the CAD traded weak agains most of its rivals, including the AUD, JPY, EUR and GBP.

The Bank of Canada (BoC) announced that it raised interest rates by 25 basis points (bps) to 5%, as expected. Regarding the statement, in summary, the bank expects inflation to decline gradually but at a slower pace than previously anticipated and stated that economic activity is forecasted to slow down in the near term, despite a recent pickup in growth. Looking forward, the BoC confirmed that they will keep an eye on evidence of excess demand and sticky core and wage inflation to determine their next monetary policy decisions.

On the US’s side, the Bureau of Labor Statistics reported soft inflation figures from June, which triggered a sharp decline in US Treasury yields. The headline US Consumer Price Index (CPI) fell to 3% YoY, while the Core CPI to 4.8% YoY, both falling short of expectations. In addition, the Federal Reserve (Fed) released its Beige Book report, which stated that the US economic activity has slightly increased since late May. However, the USD held its daily losses due to soft inflation figures, and DXY Index fell to the 100.55 zone, its lowest since April 2022. 

USD/CAD Levels to watch

The pair’s outlook for the short term is bearish as the USD/CAD now trades below its main Simple Moving Averages (SMAs) of 20, 100 and 200-days. In addition, technical indicators show weakness as the Relative Strength Index (RSI)  stands deep in negative territory and the Moving Average Convergence Divergence (MACD), which prints rising red bars.

Support Levels: 1.3145, 1.3139, 1.3115.
Resistance Levels: 1.3200, 1.3225 (20-day SMA), 1.3275.

USD/CAD Daily chart