Yesterday, the dollar weakened across the board following the release of the US PPI whose data was in line with expectations. The reaction showed that the market is keen to buy risky assets and that even small signs of improving inflation figures can trigger positive risk sentiment.
This will be important to remember in light of today’s US CPI report, where flat or weak numbers will likely lead to more dollar selling and strong risk sentiment. Conversely, hot numbers could have the opposite effect on dollar supply across the board.
USDCAD Daily
On the daily chart, we can see that USDCAD has fallen back into the key support zone around the 1.36 handle, where we can find the confluence of the trendline and the 61 Fibonacci retracement level, 8%. This is where buyers have gathered to position themselves for a return to cycle highs. Sellers will need a fundamentals-backed breakout to the downside to reverse the trend and start targeting the 1.34 handle. Today’s US CPI report will likely set the trend for the coming weeks.
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