USD/CAD: Upsurge with US CPI Data and Canadian Employment

The USD/CAD exchange rate is gaining momentum for the second consecutive day during the early Asian session on Wednesday. This increase is supported by the US January Consumer Price Index (CPI) inflation data, which is boosting the US Dollar and government bond yields. The Core CPI, which excludes volatile food and energy prices, rose by 3.9%, surpassing the market consensus of 3.7%. On a monthly basis, both the CPI and the Core CPI increased by 0.3% and 0.4% respectively. Canadian labor market data was surprisingly strong, with an increase of 37,000 jobs that more than doubled forecasts. A healthier labor market outlook could persuade the Bank of Canada (BoC) to delay interest rate cuts until June rather than April. Governor Tiff Macklem stated that the central bank has shifted its focus from debating whether interest rates are high enough to how long the central bank should keep rates at current levels. Retail Sales and Producer Price Index (PPI) data are scheduled for Thursday and Friday respectively. These data could provide a clear direction for the USD/CAD exchange rate. On a daily basis, the price is approaching a reversal zone marked on the chart. On February 12th, the market retraced to a very physiological level at 1.3427 before starting a rally. Today, the price may dip slightly before continuing its bullish run, breaking out of the reversal zone and subsequently retesting it, with a target at 1.3740. Best regards and happy trading to everyone.

Comment:

USDCAD made a good retest of the demand zone, now waiting for a BOS to confirm the bullish trend.