- US inflation data boosts the dollar
- Retail sales eyed on Thursday for signs of strong demand
- USDCAD may remain rangebound
The US dollar reached a two-month high against its Canadian counterpart on Wednesday on the back of some stronger economic data.
The inflation figures from the US propelled the greenback higher as traders were forced to scale back expectations for interest rate cuts from the Federal Reserve this year.
Next up for the US are retail sales figures for January, due on Thursday, which will give the latest impression of how strong demand is in the world’s largest economy.
The data since last summer has been particularly strong but it’s expected to have cooled in January. The fairytale scenario of a strong economy, lower inflation, and falling interest rates is now looking difficult to achieve so a weaker retail sales report this month may be welcomed.
Rangebound trade continuing in USDCAD?
After seeing resistance around the 50% Fibonacci retracement level on several occasions over the last month, USDCAD finally breached it on Tuesday.
USDCAD Daily
Source – OANDA
It’s still within the correction range though, with the 61.8 Fib now the primary focus. That it coincides with the early November lows makes it an additional level of interest.
That’s not to say it’s clear it will reverse lower from here. Far from it. The 50 Fib level was tested on repeat until it broke and the longer-term trend going back 18 months is rangebound. A rotation lower from a Fib level could suggest a breakout may come but it’s not the clear base case.
