By Ketki Saxena
Investing.com - The Canadian dollar strengthened against its US counterpart today, as cooling US CPI data raised bets for the Federal Reserve to pause rates, posing a headwind to the greenback. The cooling inflation meanwhile provided a boost to riskier assets like equities, crude, and Canada’s commodity linked, rink-sensitive currency.
The loonie received little impetus from the Bank of Canada’s decision to hold interest rates steady at 4.5%, with expectations for the hold having nearly fully priced in well prior to today’s decision.
Analysts at TD (TSX:TD) note, “There’s isn’t much for CAD to latch on regarding the BoC announcement. The tone of the statement underscores more of a hawkish hold scenario, which has likely helped USDCAD nudge lower. USDCAD HFFV sits below 1.34, suggesting that the pair is trading rich to macro drivers. We continue to like 1.33/1.37 range and look to fade the extremes of that range.”
While the loonie rose modestly following the BoC announcement, it remained the laggard amongst G10 currencies - barring the US dollar, the worst performer today following release of today’s US CPI data.
On a year-over-year basis, the headline CPI number rose 5% against economists' estimates of a 5.2% rise, while core CPI climbed 5.6% in-line with consensus estimates.
In terms of what’s next for the pair on a technical level, analysts at FX Street note, “The next downside target comes in at 1.34251 which was home to session lows from April 5. Dip buyers in the USDCAD, may be leaning against that level in hopes there is more sellers of the CAD on the dips. Having said that, there would be work to do to give buyers in the USDCAD more control (i.e., getting above the 200 and 100 hour moving averages).”
“A move below 1.3425 would have traders targeting the low price from April 4 at 1.3405. Below that the rising 200 day moving average at 1.33921 is another key support target.”