The Bank of Canada still maintains accommodative monetary policy.

The Canadian dollar has strengthened slightly amidst a weakening U.S. dollar, driven by investor confidence in the continued growth of the U.S. economy. Additionally, President Trump’s call for the Federal Reserve to cut interest rates immediately has directly impacted the dollar, causing the DXY to drop to its lowest point in over a month.

Canada's inflation rate fell to 1.8% year-on-year in December, down from 1.9% in the previous month, slightly below market expectations of 1.9%. This marks another decline in inflation since September, keeping it within the central bank's target range of around 2% for the fifth consecutive month. This has led investors to speculate that the Bank of Canada may lower interest rates further this year. Food inflation slowed significantly, while inflation for housing and rental price growth eased slightly. Meanwhile, transportation costs surged, with gasoline inflation rising over 3.5%.

Foreign investors increased their investments in Canadian assets by a net CAD 16.4 billion in November, marking the ninth consecutive month of growth and exceeding market expectations of CAD 14.5 billion. Most of the investments were in debt securities, amounting to CAD 25.2 billion, including CAD 7.1 billion in government bonds and CAD 19.5 billion in money market instruments. However, foreign investors reduced their equity holdings by over CAD 8.8 billion following sharp increases in the prior two months. At the same time, Canadian residents increased their holdings of foreign securities to CAD 17.8 billion, the highest level since March 2024.

Retail sales in Canada rose 1.6% month-on-month in December, rebounding after declines in six out of nine industry sectors in the prior month. While retail sales of food and beverages contracted slightly, the automotive and auto parts sector showed medium-term growth, increasing by over 2%, reflecting sustained, albeit below-average, consumer spending.

Canada’s raw materials price index increased by 1.3% month-on-month in December, rebounding after a decline in November. This growth was driven by a 2.4% rise in metal mineral prices, marking the fourth consecutive monthly increase. This was fueled by trade tensions, particularly China’s restrictions on exports to the U.S. Additionally, crude oil prices rose by 1% as OPEC+ decided to delay production increases to tighten market supply. Agricultural commodity prices surged by over 9.4% due to unfavorable weather conditions affecting crop yields, significantly driving up prices.

The yield on Canada’s 10-year government bonds fell below 3.45%, down from a six-month high of 3.54%, mirroring the decline in U.S. Treasury yields after core inflation slowed slightly in December. This has led investors to anticipate another potential rate cut by the Federal Reserve early this year. However, investors remain cautious amid reports that President Donald Trump’s economic team is considering raising trade tariffs by 2-5% monthly to prevent inflation from accelerating too rapidly.

Techical analysis data (5H)

Resistance: 1.4351, 1.4356, 1.4362

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.4334 - 1.434 but cannot break the support at 1.434, you may set a TP at approximately 1.4356 and SL at around 1.4329 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.4351 - 1.4356, you may set a TP at approximately 1.4362 and SL at around 1.4334 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.4351 - 1.4356 but cannot break the resistance at 1.4351, you may set a TP at approximately 1.4334 and SL at around 1.4362 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.4334 - 1.434, you may set a TP at approximately 1.4329 and SL at around 1.4356 or according to your acceptable risk.

Pivot point January 25, 2025 10:14 PM. GMT+7