Canadian Dollar stuck in the middle with all eyes on US CPI inflation

• Canadian Dollar sees little momentum in tight Wednesday trading.
• Markets await the next update on US CPI inflation due Thursday.
• CAD finds little support from struggling Crude Oil bids.

The Canadian Dollar (CAD) is stuck within a tight intraday range on Wednesday as broader markets pivot to focus on Thursday’s upcoming US Consumer Price Index (CPI) inflation print for December. Rate-cut-hungry markets will be looking for continued easing in price growth pressures from the US, but market forecast models are currently expecting a slight uptick in headline inflation figures.

Crude Oil caught a short-lived bounce on Wednesday, fueled by ongoing Middle East tensions and a fresh round of attacks on cargo ships by Houthi rebels. West Texas Intermediate (WTI) US Crude Oil fell back on the day after the Energy Information Administration (EIA) showed another surprise buildup in US Crude Oil stockpiles. The Canadian Dollar is getting less support from rising but choppy Crude Oil prices than usual as currency markets hunker down ahead ofUS CPI inflation.

Daily digest market movers: Canadian Dollar hamstrung in the midrange

• A quiet Wednesday for the Loonie with no further Canadian data releases on the economic calendar docket for the week.
• Canadian Dollar traders will be looking out for Canadian CPI inflation and Retail Sales next week, on Tuesday and Friday, respectively.
• US CPI inflation will dominate headlines and price action this week and is slated for release on Thursday.
• Broader markets are keeping an eye out for any data that will help tilt the Federal Reserve (Fed) into a rate-cutting cycle sooner rather than later.
• Thursday’s MoM US CPI from December is forecast to tick upward slightly from 0.1% to 0.2%.
• Annualized December CPI is also expected to shift from 3.1% to 3.2%.
• December’s MoM Core US CPI is forecast to hold steady at 0.3%, while the annualized Core CPI is seen ticking down from 4.0% to 3.8%.
• An upside beat to inflation data bodes poorly for the market’s rate-cutting hopes, could sever risk appetite if inflation continues to run above expectations.
• US CPI Preview: Forecasts from 10 major banks
• Crude Oil continues to struggle, rising and falling back as supply concerns centered around Middle East tensions play tug-of-war with downside pressure from rising US barrel counts.
• EIA US Crude Stocks climbed by 1.338 million barrels for the week ended January 5 versus the expected drawdown of 675K barrels, taking a chunk out of the previous week’s 5.5 million barrel drawdown.

Technical Analysis: Canadian Dollar skews sideways as markets mix in US CPI run-up

The Canadian Dollar (CAD) is mixed against the major currencies cadre on Wednesday, shedding a little less than a fifth of a percent against the Euro (EUR) but gaining about three-tenths of one percent against the New Zealand Dollar (NZD). The CAD has also climbed around a full percent against the battered Japanese Yen (JPY) thanks to a broad-market sell-off in the Yen.

The USD/CAD pair is swamped just below 1.3400, with intraday pressure skewing to the downside as the Loonie-Greenback pairing middles. Near-term price action remains buoyed by the 200-hour Simple Moving Average (SMA) near 1.3325, and bidders will be looking for continued support from a pattern of intraday higher lows driving the pair into the top end in early 2024 trading.

Daily candlesticks have the USD/CAD bid facing a slowdown of bullish momentum from the 1.3400 handle, and a technical ceiling is forming up near 1.3500 as the 50-day SMA heads for a bearish cross of the 200-day SMA. With topside action capped, a pullback could see the pair heading back into December’s lows near the 1.3200 handle.

USD/CAD Hourly Chart

USD/CAD Daily Chart