USD/CAD is off last week's high
USD/CAD formed a spike up just below 1.1200 on Friday and returned below 1.1100 this week.
Canadian dollar strengthened on Monday as the Bank of Canada’s Governor Stephen Poloz said over the weekend that stronger domestic inflation has made the central bank feel a little more comfortable. Canadian inflation increased to1-1/2-year high in January. As a result, bets that the BOC will cut rates decreased. In addition, loonie took some support from the improved risk sentiment.
According to RBC, a sharp external development is needed to push USD/CAD much further in either direction: “Perhaps another month or two of data development will be required before we see any strong trends develop in USD/CAD again”.
Data from Canada will arrive only at the end of the week – current account on Thursday and December/Q4 GDP on Friday. The focus will be definitely on GDP: a slowdown in growth’s expected. Until then the mood of USD/CAD will likely be consolidative. Support is at 1.1020 and 1.0980 and then in the 1.0900 area. Resistance is at 1.1100 and 1.1170.
Chart. Daily USD/CAD