The Loonie Losses Ground on Strong US PPI

The dollar gained traction on Thursday following a more robust than expected U.S. Producer Price Index report, which showed that inflation remains elevated at the wholesale level. Strong costs for shipping have increased the raw materials costs, which have yet to spill over to the consumer. A stronger-than-expected jobless claims report also helped buoy the greenback.

Technical

The USD/CAD edged higher and trading in a very tight range with support seen near the 10-day moving average at 1.2515. Resistance on the currency pair is seen near the 200-day moving average at 1.2567. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term negative momentum is accelerating as the MACD (moving average convergence divergence) histogram is printing in negative territory with a declining trajectory, which points to lower prices.

PPI Rises More than Expected

Labor Department reported that the producer price index increased more than expected in July, suggesting inflation remains high at the wholesale level. On Wednesday the CPI report for July showed that consumer prices were also elevated but decelerating. This was not the case at the producer level. The producer price index increased 1.0% last month after rising 1.0% in June. Year over year in July the PPI jumped 7.8%, a record high. Separately, Jobless claims declined for the third consecutive week. Claims rose by 375,000 last week, in line with Estimates.