USD/CAD moves higher on weak US inflation

The Canadian dollar has posted considerable losses in the Thursday session. In North American trade, the pair is trading at 1.3125, up 0.48% on the day. There are no Canadian events on the calendar. In the US, consumer inflation was stagnant in October, while jobless claims dropped lower.

US consumer inflation unchanged

The United States may be showing signs of recovery, but inflation remains at very low levels. In October, headline and Core CPI both dipped to 0.0%, down from 0.2% beforehand. This was short of the consensus, as the estimates stood at 0.1% for the headline reading and 0.2% for Core CPI. Over the past 12 months, inflation has risen just 1.2%, well below theFederal Reserve’s inflation target of around 2 per cent. We’ll get a look at additional inflation data on Friday, with the release of the Producer Price Index. This indicator is expected to follow the lead of CPI and slow in October – both the headline reading and Core PPI are projected to fall to 0.2%, down from o,.4% in September.

With inflation barely making a peep, the Federal Reserve has been able to maintain interest rates close to zero and implement other monetary easing measures, something that it wouldn’t be able to continue if inflation was higher. Given the economic climate for the foreseeable future, the Fed does not expect to raise rates before 2023.

On the employment front, Initial Unemployment Claims dropped to 709 thousand, down from 751 thousand and below the forecast of 730 thousand. This marked the lowest number of new claims since March, when Covid-19 hit the economy and sent unemployment numbers skyrocketing.

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USD/CAD Technical

  • USD/CAD is testing support at 1.3063. This is followed by support lines at 1.2998 and 1.2959
  • USD/CAD tested resistance at 1.3161 earlier in the North American session. Above, 1.3281 is an important weekly resistance line.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.
Kenny Fisher

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