USD/CAD Price Analysis: US Business Activity Reached a 8 Months High
- In January, Canada's annual inflation rate fell more than expected.
- The Bank of Canada may maintain steady interest rates.
- The Federal Reserve will raise interest rates three more times this year.
The USD/CAD price analysis for today is positive. On Wednesday, the dollar found support as an unexpected spike in US economic activity boosted the likelihood that the Fed would need to raise interest rates further.
According to data released on Tuesday, American economic activity climbed unexpectedly in February, reaching its highest level in eight months.
The flash US Composite PMI Output Index, which gauges the performance of the manufacturing and service industries, climbed this month from 46.8 to 50.2.
According to data released on Tuesday, Canada's annual inflation rate fell more than predicted in January to 5.9%, allowing the Bank of Canada to leave rates steady at its next meeting while past rate rises take effect.
The consumer price index climbed by 0.5% month over month, falling short of the 0.7% growth projected by economists, according to Statistics Canada.
The Bank of Canada raised its benchmark interest rate to 4.5% in January, the highest level in 15 years. It was the first major central bank to say that it would postpone further rate rises if prices fell as projected.
The Canadian economy then surprised observers by producing a net 150,000 new jobs in January, according to figures released earlier this month.
Before the release of the inflation figures, money markets projected that another rate hike would be unavoidable this year. They currently estimate a chance of roughly 80%. Analysts projected that inflation would fall slightly from 6.3% in December to 6.1% in January.
USD/CAD Technical Price Analysis
The USD/CAD is trading much above the 30-SMA on the 4-hour chart, with the RSI over 50, indicating a bullish trend. The price is consistently making higher highs and lower lows, indicating that bulls are quite powerful.
The price is currently halted at the 1.3550 critical level, where bears have returned. This might result in a retest of the 1.3500 support level before the price attempts a new high.