Canadian inflation falls below BOC’s target

The Canadian dollar pared gains against the greenback after the November inflation came under the Bank of Canada’s (BOC) target and at the slowest pace in 10 months.  The annual reading fell to 1.7% and was primarily reflecting recent declines in gasoline prices, excluding gasoline, the CPI rose 1.9% in November.

Expectations for the BOC to raise rates at the January 9th meeting has completely changed over the past month.  The markets have now completely erased the 25 basis point hike that was fully priced in November.  The next hike has been pushed towards the summer.

Price action on the USD/CAD daily chart show that 1.3500 level remains critical resistance.  If we do see the Fed bring down expectations for future hikes, we could continue to see the loonie extends its gains here.  To the downside, 1.3250 remains initial support, followed by 1.3125.

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya