Yesterday's U.S. inflation data affected the USDCAD.
Consumer price index (CPI) in the U.S. rose 4.9% year-on-year in April after 5% in March, which was the lowest value since April 2021.
Compared with March, the index rose by 0.4% due to rising prices for housing, used cars and trucks and gasoline. At the same time, energy prices generally decreased by 5.1%, and food prices rose by 7.7%.
On May 3, the U.S. Federal Reserve (Fed) raised its benchmark interest rate by 25 basis points to a range of 5% to 5.25%. The central banking system reported moderate growth of economic activity in the first quarter of 2023. The unemployment rate remains low, while inflation remains elevated, the U.S. Federal Reserve said.
The current monetary policies of the U.S. and Canada are similar in many respects.
The Bank of Canada's interest rate has remained at 4.5% for the past three meetings. The break in changing the interest rates came earlier in Canada than in the U.S., which is in favor of the Canadian dollar.
The U.S. Producer price index is taking place today at 12:30 GMT. This indicator measures the average change in selling prices over time received by domestic producers of goods and services. The PPI serves as a leading indicator for an important indicator of inflation — the Consumer Price Index. The PPI is projected to rise to 0.3% from the previous value of -0.5%. Forecasts confirmation can negatively affect the value of the U.S. dollar as the Producer price index indicates the probability of rising inflation rate, which is now higher than the regulator's target of 2%.
According to the technical analysis, the price of the USDCAD currency pair is forming the third downtrend wave. A break through the upper limit of the first wave at 1.3315 could give a signal to sell. The price support is expected at 1.3230.
The short-term outlook for the USDCAD currency pair is to sell.
The target is at the level of 1.3015.
Part of the profit should be fixed at the level of 1.3230.
A stop-loss should be placed at the level of 1.3510.
The bullish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.
This content is for informational purposes only and is not intended to be investing advice.