USD/CAD struggles at 1.2700 after US and Canadian economic data ahead of FOMC minutes

  • US retail sales exceeded expectations, but Canadian inflation exceeded the 5% threshold.
  • Market sentiment shifted to risk aversion following US Secretary of State Blinken’s remarks that Russia is moving troops to the Ukrainian border.
  • USD/CAD is neutral on the upside, but USD/CAD buyers need to recover 1.2700.

In the North American session, USD/CAD extended its weekly losses, following positive economic data from the US and Canada. As of this writing, USD/CAD is trading at 1.2690.

Financial markets are on a roller coaster as the market mood swings between risk-on/off. Before US macro data crossed the wires, US stock futures were pointing to a higher open. However, at around 1:50 p.m. GMT, US Secretary of State Blinken said he continued to see critical Russian units heading towards the border and not away from it, causing market participants to change their mood.

It’s worth noting that geopolitical headlines have been driving the market since the macro data shelved last Friday.

U.S. Retail Sales Better Than Expected as Canadian Inflation Crosses 5% Threshold

Ahead of Wall Street’s open, U.S. retail sales rose 3.8% m/m in January, above the 2% forecast by analysts, recovering from the December reading which showed a contraction of 2.5% (revised down) m/m. Excluding autos and gasoline, sales jumped 3.8% m/m, north of December’s -3.2% (revised) figure.

Meanwhile, the Canadian Economic Record released inflation figures, with the Consumer Price Index (CPI) for January jumping 5.1% year-on-year, above the 4.8% estimate, as reported by Statistics Canada. The so-called Core CPI rose 4.3% year-on-year, higher than December’s 4%.

Later in the day, at 6:30 p.m. GMT, Governor Lane of the Bank of Canada (BoC) burst the wires, followed 30 minutes later by the release of the minutes of the January meeting of the Federal Open Market Committee (FOMC), which could give clues about the Fed’s trajectory towards tightening monetary conditions.

USD/CAD Price Prediction: Technical Outlook

Since the beginning of the week, the USD/CAD has not crossed the threshold of 1.2800, accelerating the downward movement. Heading south, CAD buyers have recovered the 50-day moving average (DMA) which sits at 1.2704, but the pair is neutral on the upside despite the above.

That said, the first resistance in USD/CAD would be the confluence of the 1.2700 figure and the 50-DMA. Violation of the latter would expose the daily high of 1.2754 on Feb 11, followed by 1.2800.

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