The Canadian dollar strengthened against the US dollar and maintained its momentum after yesterday's data on inflation in Canada, which, despite slowing year-on-year, remained within the Bank's target level. The decline was due to the fall in energy prices, which is a volatile category.
USDCAD
According to the National Bureau of Statistics of Canada, consumer price index (CPI) in June rose 2.0% compared to the same period last year after rising 2.4% in May. Economists had expected the index to grow by only 1.9%. However, compared to the previous month, consumer prices decreased by 0.2% in June.
As for the core inflation, which central banks are paying more attention to, then the core consumer price index (CPI) also decreased compared to the previous month. Let me remind you that the Bank of Canada's target level is around 2%.
Inflation in the target level of the Bank of Canada is likely to postpone the regulator's decision to lower interest rates and maintain a wait-and-see position to assess the impact of adverse global factors on the economy. Many economists expect that, contrary to the decisions of other central banks that intend to lower interest rates, the Canadian regulator will leave monetary policy unchanged until the end of the year, which will continue to strengthen the position of the national currency.
A good report on the growth of activity in the manufacturing sector of Canada also supported the Canadian dollar.
According to the National Bureau of Statistics, the volume of supply in the manufacturing sector in May increased by 1.6% compared to April and amounted to 58.91 billion Canadian dollars. The data completely coincided with the forecasts of economists.
As for the current technical map of the USDCAD pair, it is likely that the pressure will continue. An unsuccessful return to the resistance of 1.3060 will serve as an additional impetus to the opening of short positions in the trading instrument, and a repeated test of the support of 1.3018, which coincides with the annual lows, will lead to a more powerful sale to the levels of 1.2970 and 1.2930.
EURUSD
A weak report on the construction of houses in the US in June could hurt the US dollar yesterday, indicating new signs of weakness in the housing market.
According to the US Department of Commerce, the laying of new houses in June this year decreased by 0.9% compared to the previous month and amounted to 1.253 million. The number of construction permits issued also decreased in June by 6.1% compared to the previous month and amounted to 1.220 million per year. Economists had expected bookmarks in June to grow by 0.7%, while permits fell by 0.3%.
Yesterday, once again, there were calls for changes in the ceiling of the US national debt. Speaker of the House of Representatives Pelosi said that Congress and the Trump administration should reach an agreement on the limit of public debt until Friday this week, as required by the regulations. Let me remind you that the members of the House of Representatives will have to go on summer vacation at the end of next week, which will seriously complicate the situation with the debt ceiling and further funding.
The main task of the Congress and the administration of the US President is to reach an agreement on raising the debt limit and setting spending levels, but it will be difficult for representatives of the Democratic and Republican parties to find a common language in order to somehow correct the situation with the accelerating growth of the debt.
As for the technical picture of the EURUSD pair, further growth will be limited by the resistance of 1.1260, where major players will try to return to the market and keep the bearish momentum on the trading instrument. The main goal of the bears at the end of the week will be at least around 1.1195, the repeated test of which can strengthen the downward trend, which will lead to the update of the supports of 1.1160 and 1.1130.
