The Canadian Dollar (CAD) remains on the defensive for the second consecutive day, depreciating over 1% against a broadly stronger US Dollar. Market sentiment has shifted away from expectations of 2024 Federal Reserve (Fed) rate cuts.
US PPI Offers Mixed Signals, Fed Speakers Assess Inflation
While US Producer Price Index (PPI) data showed some cooling, core inflation figures exceeded expectations. This offers some relief but doesn’t fully counter the risk-aversion sparked by Wednesday’s hot CPI data.
Richmond Fed President Thomas Barkin questioned whether there is a fundamental shift underway in inflation trends, suggesting a wait-and-see approach before cutting rates. NY Fed President John Williams, while acknowledging the eventual need for rate cuts, ruled out near-term hikes. Upcoming comments from Fed’s Collins and Bostic could further shape market sentiment.
Technical Outlook: USD/CAD Breaks Channel, Targets Higher
The US Dollar broke above a two-month channel top as strong inflation data negated hopes for a June rate cut. Bulls firmly control the market, driving USD/CAD past 1.3700 with no signs of reversal.
Key targets include:
- 1.3740 and 1.3770
- Mid-November high at 1.3845 (measure target of the broken channel)
Support Levels:
- Previous channel top
- 1.3660
- 1.3545
