USD/CAD finds support at 1.2860 post-US data

• The US inflation data and Gross Domestic Product beat analysts’ expectations but there is no immediate reaction in USD. 
• The Michigan Consumer Sentiment Index for April beats estimates at 98.8 versus 98.
• USD/CAD remains stuck in the 1.2810-1.2900 range since Tuesday.

The USD/CAD is trading at around 1.2873 virtually unchanged on Friday as market participants are weighing the impact the recent release of the US inflation data the Gross Domestic Product and the freshly released Michigan Consumer Sentiment Index for April.

The US inflation, as gauged by the Personal Consumption Expenditure index beat estimates at 2.5% versus 2.4% forecast for the core reading while the non-core PCE for the first quarter also beat consensus at 2.7% versus 2.8% forecast. The PCE is the favorite inflation of the Federal Reserve Bank. The sustained inflation should reassure US dollar bulls that the Fed is going to raise interest four times in 2018. Meanwhile, the US Gross Domestic Product (GDP) for the first quarter annualized also beat consensus at 2.3% against 2% forecast by analysts. To top it off, the Employment Cost index also came above expectations at 0.8% versus 0.7% forecast while the Michigan Consumer Sentiment Index for April beats estimates at 98.8 versus 98. This last batch of US data is US dollar positive. 

The US dollar Index (DXY) reached 91.99 intraday on Friday and is actually consolidating after the release of the US data. The bull move in the greenback has been going on for a while and the end of the week/month can also spark some profits taking in the long USD trade. However, the trend is strong and there are no fundamental or technical elements which should favor a sharp reversal down in the greenback.

The USD/CAD has been trading in the 1.2810 and 1.2900 range since Tuesday and is somewhat following the same pattern as crude oil WTI which is also ranging. CAD is strongly correlated to oil but lately the pair has been led by USD demand.

USD/CAD 1-hour chart

Support is seen at 1.2820 swing low and then at 1.2750 swing low. Resistance is priced in at the 1.2900 figure and at 1.2940 swing high.