Canadian Dollar firms up on Tuesday, but Greenback climbs higher

• The Canadian Dollar gave up further ground to the US Dollar despite a broad recovery.
• Canadian CPI inflation printed mostly as expected, market bets of a BoC rate cut eased.
• Crude Oil roils again as geopolitical concerns weigh on fossil fuel market flows.

The Canadian Dollar (CAD) climbed against most of its currency trading peers on Tuesday, but fell back against the US Dollar (USD), which took top spot as the best-performing major currency.

Canada’s Consumer Price Index (CPI) inflation in December mostly came in at expectation, but a lack of price growth easing has trimmed market bets of a March rate cut from the Bank of Canada (BoC).

Daily digest market movers: Canadian inflation hits forecasts, but gives little else for rate cut hopes

• Canadian MoM CPI inflation in December printed as expected as -0.3% versus November’s 0.1%.
• Annualized Canadian CPI rose, printed at market forecasts of 3.4% for the year through December compared to the previous period’s 3.1%.
• Canadian money markets now see a 34% chance of a BoC rate cut in March, down from 46% pre-CPI inflation print.
• Canadian annualized Housing Starts rose to 249.3K for the year through December, over the previous 210.9K (revised from 212.6K), beating the forecast of 243K.
• Federal Reserve (Fed) officials continue to talk down market bets of rate cuts, Fed Governor Christopher Waller notes that inflation needs to be on a gradual pace to 2%.
• Fed's Waller: Near-term data allows Fed to discuss policy cuts in 2024
• Crude Oil markets continue to churn on geopolitical factors surrounding Houthi attacks targeting civilian cargo ships through the Red Sea.

Technical Analysis: Canadian Dollar broadly gains but recedes against Greenback

The Canadian Dollar (CAD) is down around a quarter of a percent against the US Dollar on Tuesday but is climbing against the rest of its major currency peers. The Canadian Dollar gained around half a percent against the Japanese Yen (JPY) and the Australian Dollar (AUD), while climbing over a third of a percent against the New Zealand Dollar (NZD) and the Euro (EUR).

The USD/CAD rose back into the 1.3500 handle for the first time since mid-December as the US Dollar gained against the Loonie, dragging the pair higher after last week’s late bounce from the 200-hour Simple Moving Average (SMA) near 1.3350.

Daily candlesticks have the USD/CAD climbing directly into the 200-day SMA, and continued bullish momentum faces a technical quagmire with the 50-day SMA descending into 1.3500 and set for a bearish cross of the long-term moving average.

Continued bidding pressure will have the pair set for a fresh challenge of November’s peak near 1.3900, while the technical floor sits at December’s swing low into 1.3200.

USD/CAD Hourly Chart

USD/CAD Daily Chart