USDCAD drops below 200DMA after Canadian CPI

Inflation in Canada rose to 4.8% year-on-year in December, while the core inflation index also advanced to 4.0%, likely prompting the Bank of Canada to raise rates at its next week meeting.

“Ahead of next week’s Bank of Canada rate decision on 26 Jan, risks of a 25bp hike are on the rise. We are however not looking to lower our 1.2500 USD/CAD target, as we ultimately see range dynamics becoming prevalent again in USD/CAD.” Economists at Credit Suisse said after the data.

The price is now testing the long-term uptrend line from summer lows. If that level near 1.2470 is broken to the downside, we could see a larger drop over the following days. 

Another buying area could be found near 1.2430, while the key long-term support is seen at around 1.23.

The Canadian dollar is getting its strength from rising oil prices, with the WTI benchmark pushing to multi year highs above 86 USD.

Alternatively, the resistance seems to be near 1.2570 and the USDCAD pair must advance above it to cancel the immediate bearish threat.