USD/CAD’s bull run peeters out at 1.2600 level as FX markets await further US data/Fed speak

USD/CAD’s bull run of the past two sessions looks to have come to an end on Friday as the pair runs into solid resistance at 1.2600. The pair rocketed higher in recent session amid 1) broad US dollar strength as traders brought forward Fed rate hike bets following a hot October US Consumer Price Inflation report and 2) as crude oil prices (WTI) reversed sharply back from earlier weekly highs around $85.00 to current levels just above $80.00.

On its way higher this week, the pair cleared a number of key levels of resistance, including the 200-day moving average at 1.2480, a balance area around 1.2500 and the 50DMA at 1.2535. The next area of notable resistance, besides the 1.2600 level that is currently capping the price action, is at 1.2650 but beyond that, it's clear air all the way up to above 1.2750.

Day Ahead

FX markets now look to upcoming US data and Fed speak for further impetus. The September JOLTs Job-Opening report is out at 1500GMT, which should show that labour demand remains very strong. Also released at 1500GMT will be preliminary November University of Michigan Consumer Sentiment survey, which will give a timely insight as to the state of US consumer health heading into the winter holiday shopping season. As ever, the consumer inflation expectation data in the report will be closely scrutinised. Risks for USD are tilted to the upside with markets twitchy about anything that might add to the inflation narrative (like a tighter than expected labour market or higher than expected consumer inflation expectations).

FOMC Board of Governors member and NY Fed President John Williams is then scheduled to speak at 1710GMT. San Fransisco Fed President and FOMC member Mary Daly has been the only FOMC member to address this week’s shock consumer price inflation report so far. While she expressed concern about high inflation, she reiterated the stance laid out by Fed Chair Jerome Powell at the latest policy meeting that inflation pressures will likely subside next year and the Fed should be patient on rate hikes to allow time for the labour market to recover. Williams’ comments will carry more weight.

Outside of US economic events, traders will also be watching the release of the Bank of Canada’s quarterly Senior Loan Officer survey at 1530GMT, which will update on the business-lending practices of major Canadian financial institutions. The report usually does not have an impact on FX markets.