Technical Bias: Bearish
Highlights:
- USDCAD tumbles more than 100 pips, falls below 1.26.
- Canada inflation rate steadies at 1 percent YoY in February.
- Canada retail sales tumble more than forecast in January, falling 1.7%.
The USDCAD was back on its heels Friday, falling to the lower end of the two-week range as Canadian inflation steadied in February, easing speculation the Bank of Canada was considering another rate cut to deflect tumbling prices.
The USDCAD declined 110 pips to 1.2590, capping off a volatile week. The next support level is located at 1.2410, followed by 1.2311. On the upside, resistance is ascending from 1.2815. The short-term technical indicators are showing downward momentum as US dollar pairs continue to oscillate following Wednesday’s Federal Reserve policy statement.
In economic data, Canada’s annual inflation rate held steady at the bottom of the central bank’s target range in February, as cheap gasoline prices were offset by higher food and insurance costs.
The consumer price index (CPI) of goods and services rose at an annual rate of 1 percent in February, Statistics Canada reported on Friday. That followed an identical increase the previous month and matched forecasts calling for the same.
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So-called core CPI, which excludes eight volatile goods categories such as food and energy, eased to 2.1 percent annually from 2.2 percent.
The BOC has said falling gas prices could turn inflation negative over the short-run. Annual CPI is forecast to fall to 0.5 percent in the first quarter. However, the BOC is not concerned with deflation, as consumer price expectations remain firmly anchored.
In a separate report today Statistics Canada said retail sales declined more than forecast in January, as lower gas prices and fewer car sales weighed on consumer spending. Canadian retail sales fell 1.7 percent, much higher than the median estimate calling for a 0.7 percent drop. Retail sales had tumbled 1.8 percent in December.
Retail sales declined 2.8 percent in the province of Alberta, the epicenter of Canada’s oil and gas industry. That was the fourth consecutive monthly drop.
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