USDCAD reverses previous losses, climbs on geopolitical jitters

• The United States Producer Price Index for October was softer-than-expected, justifying Fed officials’ case of moderating rate hikes.
• US economic data overshadowed Canadian economic data.
• USDCAD Price Analysis: Struggles at the 100-day EMA, reclaims 1.3300 on geopolitical woes.

The USDCAD climbed toward 1.3335 during the North American session after dropping beneath the 1.3300 figure following the release of a soft inflation report in the United States. A weaker-than-expected October Producer Price Index (PPI) report strengthened the case for the Federal Reserve to moderate increases. Nevertheless, geopolitical jitters caused a risk-off impulse at the time of typing, so the USDCAD is trading at 1.3322, above its opening price.

The US Department of Labor (DoL) revealed that the Producer Price Index (PPI) for October jumped by 8% YoY, below 8.3% expected, while the so-called core PPI increased by 6.7% YoY, less than 7.1% foreseen. Of late, the New York Empire State Manufacturing Index showed conditions improved in the New York Fed area, rose 4.5, vs. estimates for a -6 contraction.

Given that October’s inflation data in the United States is in the rearview mirror, it justifies the deceleration of interest-rate increases to the Federal Funds rate (FFR), as said by Federal Reserve (Fed) officials. On Monday, the Federal Reserve board members Christopher Waller and Vice-Chair Lael Brainard expressed that need, though Brainard emphasized that the Fed has “additional work” to tame inflation.

Traders should be aware that even though Fed policymakers support less aggressive monetary policy, they are still in a hiking cycle, so there’s no Federal Reserve pivot yet. Unless they lay the path of where they expect the FFR to peak and inflation continues its downtrend, further US Dollar (USD) strength is expected.

On the Canadian side, September’s Wholesales jumped 0.1%, exceeding a contraction of 0.2% estimates by economists, as reported by Statistics Canada. At the same time, Manufacturing Sales were unchanged in September after four straight months of declines.

USDCAD Price Analysis: Technical outlook

That said, the USDCAD edged lower as it continued towards achieving the head-and-shoulders chart pattern target at around 1.3030. However, buyers are stepping at around the 100-day Exponential Moving Average (EMA) at 1,3234, which probed to be a tough nut to crack. Key resistance levels lie at 1.3400, followed by the psychological 1.3500, ahead of the 50-day EMA at 1.3525.