USD/CAD struggles at 1.2700 post-US and Canadian economic data ahead of FOMC minutes

• US Retail Sales came higher than expected, but Canadian inflation elevated above the 5% threshold.
• The market sentiment shifted to risk-off on US Secretary of State Blinken’s remarks that Russia moves troops to the Ukraine border.
• USD/CAD is neutral-upward biased, but USD/CAD buyers need to reclaim 1.2700.

In the North American session, the USD/CAD extend its weekly losses, following positive economic data from the US and Canada. At the time of writing, the USD/CAD is trading at 1.2690.

The financial markets are on a rollercoaster, as market mood swings between risk-on/off. Before US macroeconomic data crossed the wires, US equity futures pointed to a higher open. However, around 13:50 GMT, US Secretary of State Blinken said they continue to see critical Russian units moving towards the border and not away, causing a shift in market players’ mood. 

It is worth noting that geopolitical headlines are the market movers since last Friday’s putting aside macroeconomic data.

US Retail Sales better than expected while Canada inflation breaks the 5% threshold

Before Wall Street opened, the US Retail Sales in January rose 3.8% m/m, higher than the 2% estimated by analysts, recovering from December’s reading which showed a 2.5% (revised lower) m/m contraction. Excluding autos and gas, sales jumped 3.8% m/m, north of the -3,2% (revised) December’s figure.

At the same time, the Canadian economic docket released inflation figures, with the Consumer Price Index (CPI) for January jumping 5.1% y/y, hotter than the 4.8% estimated, as reported by Statistics Canada. The so-called Core CPI rose 4.3% y/y, higher than the 4% in December.

Later on the day, at 18:30 GMT, the Bank of Canada (BoC) Governor Lane would cress the wires, followed 30 minutes after by the release of Federal Open Market Committee (FOMC) January meeting minutes, which could give clues regarding the Fed’s path towards tightening monetary conditions.

USD/ CAD Price Forecast: Technical outlook

Since the beginning of the week, the USD/CAD failed to break above the 1.2800 thresholds, accelerating the downward move. On its way south, CAD buyers reclaimed the 50-day moving average (DMA) that lies at 1.2704, but the pair is neutral-upward biased despite the aforementioned.

That said, the USD/CAD first resistance would be the confluence of the 1.2700 figure and the 50-DMA. Breach of the latter would expose February 11 1.2754 daily high, followed by 1.2800.