Key Highlights
- The US Dollar declined heavily and settled below 1.3200 against the Canadian Dollar.
- There is a crucial declining channel in place with resistance at 1.3200 on the 4-hours chart of USD/CAD.
- Canada’s CPI increased 0.1% (MoM) in Jan 2019, less than the 0.2% forecast.
- The US Gross Domestic Product for Q4 2018 (Preliminary) will be released today, which could grow 2.3%.
USDCAD Technical Analysis
The US Dollar formed a significant top near the 1.3300 level against the Canadian Dollar. The USD/CAD pair started a major decline and broke the key 1.3200 support to enter a bearish zone.
Looking at the 4-hours chart, the pair broke many supports and settled below 1.3220 plus 1.3200. There was also a close below the 100 (red) simple moving average (4-hours). The last correction was capped near the 1.3230 level and later the price declined below 1.3185.
There was a break below the 61.8% and 76.4% Fib retracement levels of the last wave from the 1.3112 low to 1.3235 high. The recent decline has opened the doors for more losses below the 1.3110 and 1.3100 support levels.
The next stop for sellers could be 1.3080 and the 1.236 Fib extension level of the last wave from the 1.3112 low to 1.3235 high. To the topside, there are many hurdles for buyers near the 1.3180, 1.3190 and 1.3200 levels.
More importantly, there a crucial declining channel in place with resistance at 1.3200 on the same chart. Therefore, a break and close above 1.3200 plus the 100 (red) simple moving average (4-hours) is must for a fresh upward move towards 1.3300. If not, there is a risk of more losses towards 1.3080 and 1.3050.
Fundamentally, the Canadian Consumer Price Index (CPI) report for Jan 2019 was released by the Statistics Canada. The market was looking for a 0.2% increase in the CPI in Jan 2019, compared with the previous month.
However, the result was lower than the forecast as the CPI increased 0.1%. The yearly change was 1.4%, less than the 1.5% forecast and a lot less than the last 2.0%.
The report added that:
The Consumer Price Index (CPI) rose 1.4% on a year-over-year basis in January, down from a 2.0% increase in December. Energy costs declined 6.9%, while the growth in the price of services slowed to 2.7% as transitory pressures from the air transportation, telephone services and travel tours indexes, which boosted the all-items CPI in December 2018, dissipated. Excluding gasoline, the CPI was up 2.1% on a year-over-year basis.
The Canadian dollar faced sellers after the release, but the recent strength in EUR/USD and GBP/USD kept USD/CAD in a bearish zone below 1.3200.
Economic Releases to Watch Today
- German Consumer Price Index Feb 2019 (Prelim) (YoY) – Forecast +1.5%, versus +1.4% previous.
- German Consumer Price Index Feb 2019 (Prelim) (MoM) – Forecast +0.5%, versus -0.8% previous.
- US Initial Jobless Claims – Forecast 220K, versus 216K previous.
- US Gross Domestic Product Q4 2018 (Preliminary) – Forecast 2.3% versus previous 3.4%.
