USD/CAD: Weak US dollar pushes Canadian dollar to a 7-week high
- The USD/CAD price is falling today as investors react to Canadian inflation data.
- The headline consumer price index rose by 0.5% in September while the core CPI rose by 1%.
- Retail sales rose by 0.4% in August after rising by 0.6% in July.
The USD/CAD price is down by 0.30% today as the market reacts to the Canadian inflation numbers and the relatively higher crude oil prices. It is trading at $1.3095, which is the lowest it has been since the first week of September.
Canada inflation data
Canada, like all countries, has been affected by the Covid-19 pandemic. The disease has infected more than 204k people in the country and killed close to 10,000 of them. In recent weeks, the number has been on an upward trajectory. Yesterday, the country confirmed more than 3,200 people infected and 18 deaths.
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As a result, consumer prices have struggled to pick-up, especially in some sensitive sectors like hospitality and recreation. According to Statistics Canada, the headline consumer price index (CPI) declined by 0.1% in September, leading to an annualised increase of 0.5%. In the same month, the core CPI rose by an annualised pace of 1.0%.
According to the bureau, prices increased in four of the eight tracked sectors. Air transport declined by 3.2% while tourism activity remained weak. Passenger vehicles prices rose by 2.7% while clothing and footwear prices declined by 4.1%. Similarly, mortgage prices rose by 0.1%.
Meanwhile, retail sales made a modest improvement in August as the economy continued to reopen. The sales rose by 0.4% during the month, a decline from the July’s increase of 0.6%. At the same time, the new housing price index rose by 1.2%, better than the expected increase of 0.5%.
Mixed Canadian economic data
Recent economic numbers from Canada have been mixed. Early this month, the country reported that its August exports and imports declined to C$44.93 billion and C$47.38 billion, respectively. Another data by Ivey Institute showed that the PMI declined from 67.8 in August to 54.3 in September, which is a sign that the economic recovery is easing.
Housing starts also disappointed as they fell from 261.5k to 209.0k. However, on a positive side, the labour market continued to improve in September as the economy added more than 378k jobs. The unemployment rate fell to 9.0%.
Meanwhile, the USD/CAD price is being supported by low crude oil prices. As a leading oil producer, the Canadian economy tends to be affected by the movement in oil prices. Today, West Texas Intermediate (WTI) and Brent oil prices have fallen by 1.25% and 1.27%, respectively. In the near term, analysts expect the prices will be under pressure as the second wave spreads internationally.
USD/CAD technical outlook
On the four-hour chart, the USD/CAD price reached a low of $1.3080. The price is below the 25-day and 50-day exponential moving averages while the RSI is slightly above the oversold level of 30. It is also on the fifth wave of the Elliot wave pattern. This means that the price will likely continue falling as bears start targeting the important support at $1.3050. Start your trading journey with our free forex trading courses.