USD/CAD plunges below the 200-DMA as sellers eye 1.2400

• The US Dollar sell-off extends despite US inflation rising above 7%.
• Market participants expect the Fed’s first interest rate increase by March 2022.
• USD/CAD Technical Outlook: Bearish biased but a daily close below the 200-DMA might keep CAD bulls in charge.

During the North American session, the US dollar sell-off continued after US consumer inflation data released on Wednesday showed that CPI rose by 7.0%. Traders would expect that the US dollar may get stronger on it, as it further cements down the Fed’s first rate hike by March 2022, but per the market reaction, it appears it is already priced in. At the time of writing, the USD/CAD slides to fresh YTD lows, trading at 1.2461, a level last seen in November of the last year.

In the meantime, Light Crude oil Futures, advance 0.07%, sit at $82.70 per barrel, a tailwind for the oil-linked-currency Canadian dollar.

US Initial Jobless Claims climb, PPI edges lower than estimates

in the meantime, the US Department of Labour reported that Initial Jobless Claims for the week ending on January 7 increased by 230K, more than the 200K. At the same time, prices paid by producers, better known as the Producer Price Index for December on an annual basis, rose by 9.7%, a tenth lower than expected, showing that price pressures might get under control.

Earlier, the Philadelphia Fed President Patrick Harker said that he expected three rate hikes, followed by a reduction of its $8,7 Trillion balance sheet, coinciding with Fed’s Bostic, Mester, Daily, and other policymakers have said in the week.

Later in the day, Fed Vice-Chairwoman nominee Lael Brainard would hit the wires. The prepared remarks for her appearance at the US Senate are here.

USD/CAD Price Forecast: Technical outlook

The loonie strengthened against the greenback in the overnight session, extending the USD/CAD slump below the 200-day moving average (DMA), which lies at 1.2500. Hence, the USD/CAD is downward biased, per technical analysis. However, a daily close under the 200-DMA would add downward pressure on the pair.

The USD/CAD first support would be 1.2400. A breach of the latter would keep CAD buyers hopeful of extending towards October 21 of the last year, daily low at 1.2288, but first will need to break below November 10 cycle low at 1.2386, followed by the 1.2300 figure.

Contrarily, the pair’s first resistance would be the 200-DMA at 1.2500. A break above it would expose the January 12 daily high at 1.2580, followed by 1.2600 and then the 100-DMA at 1.2623.