USD/CAD Daily Forecast – Strong Inflation Data Provided Support To U.S. Dollar

USD/CAD Video 12.05.21.

U.S. Dollar Is Mostly Flat Against Canadian Dollar

USD/CAD is currently trying to settle back above 1.2100 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index gained upside momentum after the release of U.S. inflation reports and managed to settle above 90.50. Currently, it is trying to settle above the resistance at 90.70. In case this attempt is successful, the U.S. Dollar Index will head towards the next resistance that is located at the 20 EMA at 91 which will be bullish for USD/CAD.

Today, the U.S. reported that Inflation Rate increased by 4.2% year-over-year in April compared to analyst consensus of 3.6%. Core Inflation Rate grew by 3% year-over-year.

While the Fed has previously stated that it expected a temporary spike in prices and that it was ready to let inflation run above the 2% level for some time, inflation numbers provided significant support to the U.S. dollar on the foreign exchange market.

Treausury yields rallied as traders bet that the Fed would have to reduce stimulus sooner than previously expected, which will be bullish for the American currency. If yields continue to move higher in the upcoming trading sessions, the U.S. dollar may get more support.

Technical Analysis

USD to CAD made an attempt to settle below the support at 1.2065 but lost momentum and rebounded towards the resistance at 1.2100. In case USD to CAD manages to settle above this level, it will move towards the resistance at 1.2130.

A successful test of this level will push USD to CAD towards the next resistance at 1.2170. In case USD to CAD settles above 1.2170, it will head towards the resistance at 1.2200.

On the support side, the nearest support level for USD to CAD is located at 1.2080. A move below the support at 1.2080 will open the way to the test of the next support at 1.2065.

If USD to CAD declines below this level, it will move towards the support at 1.2040. A successful test of this level will push USD to CAD towards the support at 1.2000.

For a look at all of today’s economic events, check out our economic calendar.