- Investors are bracing themselves for US inflation data.
- The Canadian dollar weakened as oil prices fell.
- There may be upside risks to US inflation after CPI data revisions.
Today’s USD/CAD outlook is slightly bullish. On Monday, the dollar increased as investors braced themselves for the US inflation data that would boost the global outlook for interest rates.
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The Canadian dollar weakened against the dollar as oil prices fell. After climbing 2% the previous session, oil prices dipped on Monday as investors concentrated on concerns about short-term demand resulting from critically important impending US inflation data.
There have been worries that the US Federal Reserve’s recent increases in interest rates to control inflation may reduce oil demand and slow economic growth.
This week’s US consumer price and retail sales statistics might well influence the direction of USD/CAD in the short term, with much depending on whether inflation slowed down in January.
According to median estimates, consumer prices will increase by 0.4% for the month overall, while sales will increase by 1.6%.
Given that the CPI for December and November were revised upward in the reanalysis of seasonal components reported last week, there may be upside risks. As a result, core inflation increased from 3.1% to 4.3% on a three-month annualized basis.
JPMorgan’s head of economic analysis, Bruce Kasman, predicts that core CPI will increase by 0.5% and sales will increase by 2.2%, confirming the message of resilience from the strong January payroll data.
News that the US air force had shot down an airborne item near the Canadian border, the fourth object downed this month, added to the global mystery.
USD/CAD key events today
Investors are not expecting any economic releases from Canada or the US, so the pair will likely consolidate ahead of US inflation figures.
USD/CAD technical outlook: Bears will likely take out the 1.3350 support level.
The 4-hour chart shows USD/CAD in a bearish move, with the price below the 30-SMA and the RSI below 50. After many failed attempts to break above the 1.3450 resistance, bears took over and pushed the price below the 30-SMA, reaching the 1.3350 support level.
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Bulls have shown up at this support level for a pullback. However, all indicators point to more downside. Bears must, however, break below 1.3350 to support the bearish move to continue.
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Saqib Iqbal
