US and Canadian Data Reinforced the Triangle Support for USD/CAD

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US and Canadian Data Reinforced the Triangle Support for USD/CAD

Today, we had a slew of economic data out of the US and Canada. Let’s take a look at these releases and assess the USD/CAD’s reaction as well as technical developments.

US CPI m/m (Jan.): -0.7%
Forecast: -0.6%
Previous: -0.4%
usdcad 4h chart 2/26
(click to enlarge; source: forexfactory.com)
Core CPI m/m (Jan): 0.2%
Forecast: 0.1%
Previous: 0.0%
US Jobless Claims: 313K
Forecast: 288K
Previous: 282K
US Core Durable Goods m/m (Jan.): 0.3%
Forecast: 0.6%
Previous: -0.9%

From the US side of things, we saw the the headline inflation reading continues to be negative on the month to month basis. In January, oil prices was only starting to bottom, so energy prices were still declining. We know oil prices stabilized in February, so the negative headline reading won’t have much impact. The core reading edged higher and shows that inflation may be stabilizing. Jobless claims rose above 300K, but the general trend remains below 300K and the disappointing data should not have much impact unless we get a few more consecutive 300K+ readings. The core durable goods data rose after a disappointing December. It missed forecast so it is not that impressive. The headline data, which includes transportation, increased 2.8%, following a 3.7% decline in December.

All-in-all, the data set was slightly negative, though more emphasis is going to be on inflation outlook, which is neutral at this point (the positive core data offsets the disappointing negative headline reading).

Let’s take a look at Canada:

CAN CPI m/m (Jan.): -0.2%
Forecast: -0.4%
Previous: -0.7%
can cpi
(click to enlarge; source: forexfactory.com)
Core CPI m/m (Jan.): 0.2%
Forecast: 0.1%
Previous: -0.3%

Inflation data in Canada was similar to that of the US. the headline reading remains negative but the core reading, excluding volatile items such as oil, became positive. There is a sense that inflation is starting to stabilize so that should be good for the CAD in general, but maybe not against the USD. Let’s take a look at the USD/CAD:

USD/CAD 4H Chart 2/26
usdcad 4h chart 2/27
(click to enlarge)

After a false breakout above a falling triangle, the support in the 1.2350-1.2360 area became vulnerable. USD/CAD was heading towards this level before tagging 1.24 and the 200-period SMA. It then rebounded, and extended to 1.25 after the US and Canadian data.

So far, it looks like the market is still bullish on the USD/CAD. However, if price can not close above 1.25 today, the pressure in the short-term remains on the 1.2350 triangle support. Above 1.25, pressure would be back towards this week’s high around 1.2660, and if price does make it there, USD/CAD will have the 1.28 area in sight.

Below 1.2350, USD/CAd will open up 1.21, where there was a very brief consolidation, then the 1.20 handle, which represents another short-term consolidation around mid-January.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.