- Canadian headline CPI decelerated to 2.0% in June and weighed on the CAD.
- Rebounding Oil prices extended some support to Loonie and capped gains.
- The USD remains on the defensive amid sliding US bond yields and dismal data.
The USD/CAD pair quickly bounced around 25-pips in reaction to the latest Canadian consumer inflation figures, albeit remained well below the 1.3100 handle.
The pair managed to find some support near mid-1.3000s and the latest leg of a sudden pick up during the early North-American session was supported by softer Canadian consumer inflation report, showing that the headline CPI decelerated to 2.0% yearly rate as compared to 2.4% recorded in the previous month.
Moreover, the BoC’s core CPI remained flat on a monthly basis (0.1% rise expected) and unexpectedly ticked lower to 2.0% from 2.1% previous – worse than consensus estimates pointing to a rise to 2.6%, which was eventually seen as one of the key factors that exerted some pressure on the Canadian Dollar.
Adding to the disappointment, Canadian monthly manufacturing sale – though posted a solid rebound in May, fell short of consensus estimates, which largely offset weaker US housing market data – building permits and housing starts, and remained supportive of the pair’s uptick.
Meanwhile, the ongoing downfall in the US Treasury bond yields held the US Dollar bulls on the defensive. This coupled with a solid rebound in Crude Oil prices extended some support to the commodity-linked currency – Loonie and kept a lid on any runaway rally for the major, at least for the time being.
Hence, it would be prudent to wait for a strong follow-through buying before confirming that the pair might have already bottomed out in the near-term and positioning for any further near-term appreciating move back towards the 1.3145-50 heavy supply zone.
Technical levels to watch