According to data provided by the Ministry of Labor, the annual consumer price index (CPI) rose in USA to 8.5% in March (against 7.9% in February), the highest value in 41 years. As the data show, CPI has grown at the fastest pace since December 1981. The value of 8.5% is more than 4 times the Fed's target. On a monthly basis, CPI rose 1.2% (up from 0.8% in February), the fastest gain since September 2005.
The dollar fell after the publication of inflationary data for the US, because market participants felt that the Fed may not be able to cope with such a strong acceleration of inflation. The greenback is down again today, while DXY dollar index futures are currently traded near 99.66, off Tuesday's intraweek high of 100.52, which in turn is a new 23-month high. If the decline in the dollar continues, then this week the DXY index will close in negative territory.
Clearly, unless Fed officials take more decisive action to tame accelerating inflation, further dollar gains, as many economists expected, could stall.
At the same time, yesterday's meeting of the Bank of Canada, which ended with an increase in interest rates by 0.50% (up to 1.0%), turned out to be a positive factor for the CAD. Most economists expect the Bank of Canada's key interest rate to reach 2% by the end of 2022 (compared to expectations of 1.75%-2.0% of the Fed's rate by the end of the year, with a 0.25% increase at each meeting).
Thus, the Canadian dollar is a serious competitor to the US dollar.
USD/CAD is traded below key resistance levels 1.2635, 0.2850. Downward dynamics prevails, making short positions preferable. Breakdown of the support level 1.2540 will be a signal for their growth.
Support levels: 1.2540, 1.2450, 1.2400, 1.2290, 1.2165, 1.2050
Resistance levels: 1.2576, 1.2606, 1.2635, 1.2675, 1.2700, 1.2730, 1.2800, 1.2850, 1.2900
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Source: InstaForex
