Canadian CPI At 30-Year Highs, USD/CAD Bears Remain In Control
Matthew Weller | Jan 20, 2022 12:05AM ET
In an otherwise quiet morning for economic data on Wednesday, Canada released its closely-watched CPI data for December. On a headline basis, prices actually fell -0.1% month-over-month as expected, but the news latched onto was the fact that yesterday’s reading drove Canada’s annual inflation rate to 4.8%, its highest level since 1991!
USD/CAD traders have taken the as-expected print in stride, focusing instead on the general risk appetite in the market and the fact that the price of crude oil (Canada’s most important export) is trading at its highest level since October 2014.
From a technical perspective, the North American pair has confirmed its Head-and-Shoulders pattern by breaking below the neckline at 1.2620, as my colleague Joe Perry anticipated last week . Using a “measured move” projection of 340 pips (the height of the formation) points to a bearish objective near the previous support levels from June and October in the 1.2290 zone:
Source: TradingView, StoneX
It remains to be seen whether USD/CAD will ultimately extend its decline all the way below 1.2300, but as long as oil prices and economic data remains strong, the path of least resistance in USD/CAD remains to the downside.
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