The Canadian dollar is holding firm on the day ahead of the CPI data release
The loonie has been one of the top performers over the past three months - only behind the yen - as the currency is largely benefiting off more positive economic data as well as a central bank that doesn't appear to be on the easing train just yet.
The Bank of Canada may have highlighted some risks to the economic outlook last week but they're largely international/global whereas domestic conditions remain robust as they foresee stronger growth in Q2.
The statement on inflation also makes it clear that should June CPI data later today come in within expectations - largely similar to May - then it isn't going to change their current stance on monetary policy.
USD/CAD broke below the long-term trendline support in June and after a move back below the 200-day MA (blue line), sellers have driven price lower towards support around 1.3050 seen currently over the past two weeks.
Price is moving back towards that level again with the low today hitting 1.3055 as sellers are aiming for a move to test the 1.3000 handle. In my view, that is the next key level to gauge any further downside pressures in the pair in the short-term.
The uncoordinated movement in oil prices recently is making it a bit of a challenge for the loonie to hold sustainable gains but as long as the Bank of Canada maintains their stance (amid other major central banks growing more dovish) and economic data continues to deliver, there's still reason for the Canadian dollar to hold gains.
In the near-term, let's see if sellers can keep up the pace and break below support around 1.3050 before revisiting the 1.3000 handle. Should those levels start to give way, that will give legs to the next rally in the loonie.
