USD/CAD plummets to 1.2620 on CPI data

• Inflation figures in Canada came in above consensus in January.
• CA headline CPI rose 1.7% YoY, BoC’s Core CPI rose 1.2% YoY.
• Spot quickly tested lows near 1.2620, where it found some support.

The Canadian Dollar gathered unexpected traction vs. its American neighbour on Friday, dragging USD/CAD to as low as the 1.2620 region.

USD/CAD in 3-day lows

The pair rapidly tumbled to fresh multi-day lows in the 1.2620 area after Canadian inflation figures showed consumer prices tracked by the CPI rising above consensus at an annualized 1.7%. On a monthly basis, prices rose 0.7%, sharply reverting December’s 0.4% contraction.

In addition BoC’s Core CPI matched estimates advancing 1.2% over the last twelve months.

In the meantime, spot is posting losses for the first time after five consecutive daily advances, including yesterday’s fresh YTD peaks in the 1.2760.

CAD is looking to US-CA yield spread differentials as the almost exclusive driver for the price action - particularly in the shorter end of the curve - leaving crude oil dynamics to a secondary role when comes to determine direction.

USD/CAD significant levels

As of writing the index is losing 0.36% at 1.2658 facing the initial hurdle at 1.2597 (10-day sma) followed by 1.2511 (21-day sma) and then 1.2447 (low Feb.16). On the other hand, a breakout of 1.2759 (2018 high Feb.22) would open the door to 1.2920 (high Dec.19 2017) and finally 1.2927 (50% of the 2017 drop).