By Ketki Saxena
Investing.com -- The Canadian Dollar traded in a tight range vs. its US counterpart today, as markets await impetus from tomorrow’s US CPI print.
The Canadian dollar gained some support from an uptick in risk-sentiment, reflected in equities. However, the commodity linked loonie faced pressure from sliding crude prices, following a surprise build in US inventories.
"USD-CAD has traded in an extremely narrow range today as traders sit on their hands awaiting tomorrow's key U.S. CPI report for December," noted Michael Goshko, senior market analyst at Convera Canada ULC.
The US dollar meanwhile was modestly weaker against a basket of major currencies, with trading relatively quiet ahead of tomorrow’s CPI release.
The headline reading is forecast to come in at 3.2% YoY, above the previous month's 3.1% print.
Despite forecasts from the Federal Reserve for only 75 bps of easing next year, markets are currently betting on five Fed rate cuts in 2024.
Looking ahead for the pair, analysts at SocGen note that “Lower Fed rates will help CAD extend recent modest gains.”
The loonie should be particularly reactive to interest rate shifts, the SocGen analysts note, given that “The most interest rate sensitive developed-economy currencies are the ones sensitive to housing.”
On a technical level for the pair, analysts at FXStreet note, “Daily candlesticks have the USD/CAD bid facing a slowdown of bullish momentum from the 1.3400 handle, and a technical ceiling is forming up near 1.3500 as the 50-day SMA heads for a bearish cross of the 200-day SMA.”
“With topside action capped, a pullback could see the pair heading back into December’s lows near the 1.3200 handle.”