USD/CAD takes on a big psychological level
Yesterday, USD/CAD traded as high as 1.3500 but after touching that level it was immediately beaten back down to 1.3458, suggesting some kind of options trade could have been at work.
In any case, today's CPI numbers were much softer than expected. You have to give the BOC credit, they've brushed off months of stronger economic data and said that disinflationary pressures were in the pipeline. Today's numbers have proven them right.
And that's what helps to explain why USD/CAD has only risen 30 pips on what was a big miss on inflation data. This really doesn't change anything from the BOC. They were dovish and said inflation would be low.
That said, I expect 1.35 to come under more pressure. There was some M&A announced yesterday and that could be hedged today (but who knows).
If 1.3500 breaks, there's a chance of a run on stops. The next level to watch is 1.3535, which was the March 9 high.
