The USD/CAD dropped from 1.3455 to the 1.3410 area following the release of US and Canadian economic data. The Loonie is among the top performers of the day in the currency market.
In Canada, data released on Thursday showed the Consumer Price Index (CPI) rose to 4.4% on a yearly basis in April from the 19-month low of 4.3% in March, and against expectations of a decline to 4.1%.
“Inflation now lies well above the April MPR's implied forecast of 4.0% y/y, and while the top-line story on core inflation may provide some reassurances to the BoC, the underlying story is one of further evidence that policy may not be tight enough to bring inflation down to its 2% target over a reasonable horizon. The risks continue to build for a BoC hike later this year, especially if Q1 growth figures surprise sharply to the upside”, commented analysts at TD Securities.
The Loonie rose across the board after the CPI, hitting fresh daily highs. At the same time, data from the US triggered a mixed reaction to the Greenback. US Retail Sales rose 0.4% in April, below the 0.7% market consensus, but March figures were revised upward from -1% to -0.7%.
The USD/CAD is falling sharply for the second day in a row and is approaching the 1.3400 level. A break below this level could expose the next support area seen around 1.3360/70. A daily close below this area could open the door for a test of the monthly low at 1.3310/15.
The immediate resistance for the pair is the 1.3455 area. If the it rallies above this level, it would alleviate the current bearish pressure.
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