USD/CAD Pulled Back Ahead of Tomorrow’s US CPI Data

The dollar eased against the Loonie ahead of the release of US CPI data tomorrow. The USD/CAD remains in its February range. On Friday, options for more than $2.7 bln expire at CAD1.2650. US benchmark yields retreated, although the 10-year yield held above 1.9%. Gold prices edged higher for the fourth consecutive trading session ahead of mounting inflation. The Euro moves higher due to a possibility of an ECB rate hike. Fed officials speak today ahead of tomorrow’s key inflation report. Markets are pricing in a 75% chance that the Fed raises rates by 25 or 50 basis points in March.

Technical Analysis

The USD/CAD retreated against the Loonie despite staying within the range of CAD1.2650-CAD1.2660. Resistance is seen near the 50-day moving average at 1.271. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. The exchange rate moves toward oversold territory, reflecting accelerating negative momentum. Medium-term momentum is positive as the MACD (moving average convergence divergence) index generates a crossover buy signal, but momentum decelerates. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) converges to the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in positive territory with a downward sloping trajectory which points to consolidation.

Russian Inflation in January Surges Ahead of Monetary Policy

Russia’s annual inflation rate accelerated to 8.73% in January 2022, increasing from 8.39% in December 2021. The market predicted an increase of 8.8%. The rate is the highest it has been since January 2016. Despite tightening monetary policy, the central bank’s target inflation rate is 4%. Food prices, non-food products, and services caused upward pressure. Following this acceleration, the central bank is expected to raise rates by 100 basis points.