FTSE falls as inflation and GBP rise. Canadian CPI could send USD/CAD lower.
FTSE falls as inflation and GBP rise
UK inflation surged higher in October, surpassing expectations. CPI jumped to 4.2% YoY, up from 3.1% in September and well ahead of the 3.9% forecast. This was also over double the BoE’s 2% target.
Core inflation also jumped to 3.4%, up from 2.9% in September and ahead of the 3% expected.,
The data comes following encouraging labor market data yesterday after unemployment ticked lower to 4.3%.
The strong data points to wards the BoE raising interest rates possibly at the December meeting.
The pound is advancing for the fourth straight session, which is bad news for the multinationals on the FTSE given the unfavorable exchange rate.
Where next for the FTSE?
The FTSE has fallen through the rising trend line dating back to mid-September, which along with the bearish crossover on the MACD is keeping sellers hopeful of further downside.
Currently support at 7300 round number is being tested, a fall below here exposes the 20 sma at 7283. A move below 7250 the November 10 low could negate the near-term uptrend and open the door to 7195 the October 28 low.
Buyers will be looking for a move back over 7330 the rising trendline support turned resistance and November 10 high, which opens the door towards 7400 and fresh post pandemic highs.
Canadian CPI could send USD/CAD lower
USD/CAD rallied in the previous session after US retail sales rose for a third straight month. Sales rose 1.7% MoM, ahead of the 1.4% forecast and well up from 0.7% recorded in September. US households continued spending despite prices rising at the fastest pace in 30 years.
Meanwhile the loonie traced oi prices lower. Oil tumbled on Tuesday after amid growing concerns that the Biden administration would release strategic reserves to bring oil prices lower.
Today EIA oil inventory data is in focus in addition to Canadian CPI data which is expected to rise 4.7% YoY. A strong CPI print could see the pair pull back further.
Where next for USD/CAD?
After extending the rebound from October 21 low of 1.2285, USD/CAD ran into resistance at 1.26 last week and has been edging lower. The price is testing the 100 sma at 1.2550.
The 50 sma appears to be crossing below the 100 sma in a bearish signal. However, USD/CAD would need to break below the 100 sma at 1.2550 and the 50 at 1.2530 to open the door to 1.2490 the September low. A move below here could negate the near term up trend.
It would take a move below support at 1.2385 for sellers to gain traction towards 1.2285 (FXC).
Meanwhile buyers could look for a move over1.26 for confirmation of further gains.
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