USD/CAD flirts with 1.2500 mark, downside seems limited amid sliding oil prices
- USD/CAD witnessed some intraday selling and turned lower for the second straight day.
- The USD witnessed some profit-taking following the release of mixed US inflation data.
- A fresh leg down in crude oil prices undermined the loonie and helped limit the downside.
The USD/CAD pair slipped below the key 1.2500 psychological mark on reaction to mixed US consumer inflation figures, though lacked any follow-through selling.
The pair struggled to capitalize on its modest intraday gains, instead met with some fresh supply near the 1.2550 region and turned lower during the early North American session. This marked the second successive day of a negative move and was sponsored by a modest US dollar pullback following the release of mixed US consumer inflation figures.
The headline CPI decelerate to 0.5% in July from the 0.9% rise recorded in the previous month. Adding to this, core CPI, which excludes food and energy prices, rose 0.3% MoM against 0.4% expected and June’s 0.9%. This, along with Richmond Fed President Thomas Barkin’s comments, prompted some USD profit-taking and exerted pressure on the USD/CAD pair.
The greenback was further weighed down by Richmond Fed President Thomas Barkin’s comments, saying that it may take a few months more for the US job market to recover enough for the Fed to reduce its crisis-era support for the economy. This, along with a modest pullback in the US Treasury bond yields and a positive risk tone, further undermined the safe-haven USD.
The USD/CAD pair extended the previous day’s rejection slide from the very important 200-day SMA, though a fresh leg down in crude oil prices helped limit any further losses. Oil prices fell sharply after the US urged OPEC and its oil-producing partners to boost output. This, in turn, undermined the commodity-linked loonie and extended some support to the major.
As investors continue to update their bets on when the Fed will begin scaling back its stimulus, it will be interesting to see if the USD/CAD pair is able to attract any buying at lower levels. Nevertheless, repeated failures near a technically significant moving average warrant some caution before positioning for any meaningful appreciating move.