CAD rebounds, investors eye CPI

The Canadian dollar has started the new trading week in positive territory, extending the gains we saw on Friday. Currently, USD/CAD is trading at 1.2502, down 0.40% on the day.

In the US, inflation is surging, and the Fed’s message that inflation is transitory is looking more out of sync with the inflation data. October inflation numbers were red hot, with headline CPI rising to 6.2% y/y and CPI climbing to 4.6%, as both reads were the fastest pace seen since the early 1990s. A key question is how long can the Fed continue to ignore the inflation data and not take action.

The job numbers point to many unfilled openings as the demand for workers continues to outstrip supply. JOLT job openings remained high in September at 10.44 million, lower than the August read of 10.62 million but above the consensus of 10.30 million.

In addition to high inflation, inflation expectations have hit multi-year levels, climbing to 4.9% in October. Inflation expectations can translate into actual inflation and is another indication that inflation is not showing signs of cooling off anytime soon.

Canada Manufacturing Sales slide

In Canada, Manufacturing Sales for September declined by 3.0%. Most of the decline was due to a decrease in sales of motor vehicles due to the shortage of semiconductor chips. This hampered production in Canadian auto assembly plants and the supply chain disruption will likely continue into 2022.

Canada will release CPI reports on Wednesday. As is the case in the US, inflation is soaring and has become a headache for the Bank of Canada. In September, headline inflation hit 4.4% y/y, its highest level since 2003.  The BoC has signalled that it may raise rates around mid-2022, but the markets have priced in a hike for March of next year. If the CPI release beats expectations, the BoC will be under pressure to bring forward its timeline for a hike, which would give a boost to the Canadian dollar.

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 USD/CAD Technical

  • There is support at 1.2423. Below, there is support at 1.2296
  • There is resistance at 1.2641, followed by 1.2732

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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