USD/CAD Open: 1.0173-76 Overnight Range: 1.0146-1.0188
The Canadian dollar gained to near 1.0110 USD/CAD on the back of a strong CPI report this morning. Oil is higher at $87.23 and gold is at $1,639. NY futures are slightly positive.
The short term Canadian dollar technicals remain negative while above parity. For today, USD resistance is at 1.0213, 1.0250, 1.0373, and 1.0450. Support is at 1.0131, 1.0057 and 1.0005.
Canada’s CPI report came in strong today (3.2% and core at 2.2%) and the loonie started to fly. This strong report will put pressure on the Bank of Canada from reducing rates, as some traders expected, and to keeping rates steady for the most part and that bodes well for the loonie. The Bank of Canada raises rates to reduce inflation but raising rates typically attracts a flow of funds in to the Canadian dollar. While the BoC has flexibility in terms of how its managing its rate policy, if economic data continues to muddle through, the EU situation gets better, and inflation is above expectations, the BoC is not in a position to reduce rates, rather may be pressured to raise rates by mid to late next year. Markets remain cautiously optimistic that the EU summit will bring positive results and a deal can be reached to recapitalize banks sometime in the next few weeks, but this remains the key event driving sentiment and flow of funds. Expect volatility driven by eurozone headlines to continue to move markets.
Today’s Range: 1.0050 – 1.0175
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