Canadian CPI Saves Loonie from the Greenback Storm
Posted on December 17, 2009 by Yohay
Filed Under Forex News | 9 Comments
Canadian consumer prices rose more than expected. This might lead to an early rate hike in Canada, and helps the Canadian dollar weather the huge strength of the American dollar that was a late reaction to the Fed decision. Contrary to other currencies, USD/CAD didn’t breach a technical barrier and is ready to move in the other direction.
Canadian CPI rose by 0.5% in November, more than a 0.3% rise that was predicted. It’s also far better than the drop of 0.1% in prices that was seen last month.
Core CPI, which is regarded by some as even more important, rose by 0.4%, double the expectations, and higher than last month’s 0.1% rise.
Mark Carney, governor of the Bank of Canada, talked about the end of Q2 2010 as a possible due date for a rate hike. With inflation lifting its head, he could make a move earlier.
His counterpart from the south, Ben Bernanke, continued the stance of low rates for an extended period of time. Note that American CPI, that was published just yesterday, came out below expectations – another advantage for the Canadian dollar.
6 hours after the Fed decision, the markets began to move. The dollar swept the board and made big gains. Some currencies suffered more than others. The rage is blamed on the full half of the glass that traders relate to – the cautious optimism for future improvement in the American economy. EUR/USD, AUD/USD, NZD/USD and also GBP/USD broke major support lines.
On this background, USD/CAD handles the situation in a better manner. Yes, the greenback strengthened against the loonie, but no major resistance lines were broken.
Canadian CPI helped USD/CAD stay below the 1.0750 resistance line. It now trades at 1.0720, still in the 1.04 – 1.0750 range. For more technical insight on the loonie, read the Canadian dollar forecast.
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