USD/CAD drops toward mid-1.32s after disappointing PCE inflation data

• Annual core PCE price index comes in at 1.8% in October.
• US Dollar Index stays below 97 ahead of FOMC minutes.
• Canadian account deficit declines in Q3.

After advancing to a daily high of 1.3312 earlier in the day, the USD/CAD pair reversed its course and fell toward the 1.3250 mark in the last hour. As of writing, the pair was down 0.1% on the day at 1.3263.

Today’s data from the U.S. showed that the annual core PCE price index, the Fed’s preferred gauge of inflation, rose 1.8% in October to fall short of the market expectation of 1.9%. With the initial reaction to the data, the US Dollar Index slumped to 96.68 but staged a modest rebound as the further details of the report showed that the personal income and personal spending increased by more than expected in the same period. At the moment, the index is virtually unchanged on the day at 96.85. Commenting on the data, “Personal income and expenditures in October were better than analysts forecasts.  Holiday spending should at least equal its historical average with good possibility for a strong selling season,” FXStreet senior analyst Joseph Trevisani said.

On the other hand, Statistics Canada announced that the current account deficit in the third quarter narrowed to $10.3 billion while the average weekly earnings rose 1.8% on a yearly basis in September following August’s 2.8% reading.

Meanwhile, reports of Russia willing to join the output cut allowed crude oil prices to gain traction on Thursday to give an additional boost to the commodity-related loonie. As of writing, the WTI was up 1.7% on the day at $51.15.

Technical levels to consider

On the downside, supports are located at 1.3235 (Nov. 27 low), 1.3185 (Nov. 26 low) and 1.3125 (Nov. 16 low). Resistances, on the other hand, could be seen at 1.3330 (Nov. 28 high), 1.3385 (Jun. 27 high/2018 high) and 1.3465 (Jun. 12, 2017, high).