Investing.com – The index weakened against its U.S. peer on Tuesday as hotter-than-expected U.S. inflation data prompted markets to speculate on the prospect of a rate cut by the U.S. Federal Reserve.
Growth was 3.2% last month, faster than the 3.1% gain expected. From month to month general consumer price index in February grew by 0.4%, in line with expectations
“The US dollar is broadly higher on the back of a hotter inflation report and that’s the story of today’s FX market,” said Adam Button, chief FX analyst at ForexLive.
With the Bank of Canada unlikely to want to diverge too much in favor of the Fed, and continued pressure from the Bank of Canada to cool the Canadian economy, “economic risks will begin to accumulate in 2025 around global and Canadian growth,” Button said.
This view is also echoed by analysts at Monex Canada, who note that “while the Bank of Canada’s strong long-term stance should provide some near-term protection from the CAD sell-off, its negative impact on growth creates a dynamic in which the CAD should consistently underperform.”
However, on a technical level, the pair is expected to remain rangebound in the near future.
FXStreet analysts note: “The pair is between the supply and demand zones between 1.3450 and 1.3590.”
“A bullish reversal in USD/CAD will push bids off the 200-day simple moving average (SMA) at 1.3478, opening up a route to 1.3600 for buyers as a pattern of higher highs emerges on the chart. paper.”
“On the downside, failure to capture territory north of the 200-day SMA will see the pair return to early February lows around 1.3360.”