USD/CAD - US spending data boost the greenback

• US PCE m/m 0.2%, core PCE m/m 0.2% 
• US spending increases 0.7% in December
• USDCAD doesn't break double top neckline

Inflation, income and spending data for the US was released on Friday and broadly speaking the numbers were in line with expectations, with one outlier.

Spending last month increased 0.7%, comfortably exceeding the 0.5% that was expected. It also came on top of the upward revision to the November reading, which increased to 0.4% from 0.2% previously. All things considered, it's another sign that the US consumer and economy are in very healthy shape going into the new year.

That it was released alongside inflation data - the Fed's preferred PCE reading - will be additionally comforting for investors as it suggests it's not coming at the expense of inflationary pressures heating up again. They're now running at a rate much more consistent with the Fed's 2% target, especially over the last few months. A March rate cut still looks a very real possibility.

USDCAD pares losses after data

The US dollar is still down against its Canadian counterpart on the day but it's pared a lot of this since the release.

USDCAD Daily

Source - OANDA

What's interesting is it came at a time when a potentially significant breakout was possible. The price had just rebounded off the 50% Fibonacci retracement level for the second time, a potentially bearish signal, and may have then broken the neckline of a double top, as per the 4-hour chart below. A break of this could have been very bearish. Now it's less clear, although that level, and the 50 Fib, are key.

USDCAD 4-Hour