Canadian Dollar softens on Friday as markets grapple with acceleration in US PPI inflation

• The Canadian Dollar backslid on Friday as CAD traders retreat for the weekend.
• Canada revealed another sharp contraction in new building permits.
• US PPI wholesale inflation accelerated, but markets are trying to shrug it off.

The Canadian Dollar (CAD) shed weight on Friday, falling to the bottom as one of the poorest-performing major currencies for the last session of the trading week. Broader markets are shaking off an unexpected acceleration of US Producer Price Index (PPI) wholesale inflation, instead focusing on cooling Consumer Price Index (CPI) inflation from earlier in the week.

Canada posted 2024’s second-steepest contraction in Building Permits in May, hobbling the CAD further and setting the Canadian Dollar up to churn on the low side as traders await next Tuesday’s Canadian CPI inflation print. 

Daily digest market movers: Canadian Dollar stumbles on bad housing data

• Canadian Building Permits contracted 12.2% in May, the second-steepest decline in 2024.
• US core PPI wholesale inflation accelerated notably in June, rising to 3.0% YoY compared to the expected 2.5%.
• The previous period’s print was also revised higher to 2.6% from the initial 2.3%.
• MoM core US PPI rose 0.4% MoM, double the forecast 0.2% while the previous month’s print was likewise revised upwards to 0.3% from the initial 0.0%.
• The University of Michigan Consumer Sentiment Index for July declined to a seven-month low of 66.0 from the previous 68.2, reversing the forecast uptick to 68.5.
• Despite the upswing in producer-level inflation, markets are broadly leaning into the bullish side, focusing on Thursday’s cooler-than-expected CPI inflation print.

Technical analysis: USD/CAD swamped out in near-term midrange

The Canadian Dollar (CAD) is one of the poorest-performing currencies on Friday, shedding weight across the board and struggling to develop any meaningful momentum against the US Dollar. USD/CAD is stuck in a lurch just above the 1.3600 handle, and threatening to spiral out into a longer-running consolidation phase as the pair finds little reason to push too far in either direction.

Intraday bidding remains capped below the 200-hour Exponential Moving Average (EMA) at 1.3640, and tests to the low side are unable to find a foothold below 1.3600. Daily candlesticks are bolstered by the 200-day EMA at 1.2594, keeping a lid on downside pressure while a supply zone priced in above 1.3750 caps off any bullish attempts.

USD/CAD hourly chart

USD/CAD daily chart