Societe Generale strategists note that USD/CAD has bounced after defending its January lows and is now gravitating toward the 200-day moving average, which they see as initial resistance. They highlight nearby support and stress that Canada Consumer Price Index (CPI) could move both Canadian bonds (CANGBs) and USD/CAD, with market pricing implying further Bank of Canada (BoC) hikes.

Rebound eyes key resistance levels

"USD/CAD has staged a bounce after defending the January lows near 1.3530/1.3480."

"The pair is gradually heading toward the 200-DMA near 1.3815, which may serve as the first layer of resistance. If the ongoing rebound peters out around this moving average, the downtrend may persist."

"Last week’s low of 1.3640 is a short-term support; a break below this may trigger another leg of a downward move."

"Canada CPI is a potential market mover for CANGBs and USD/CAD. The pair stalled at the 50dma (1.3740 area), the 200dma above is situated at 1.3812 if risk sentiment sours."

"Consensus is for a rise in headline CPI to 3.1% yoy in April from 2.4% in March and no change in core at 2.2% yoy. The OIS curve is pricing in nearly two hikes by the BoC by October, in line with broader G10. This would restore the policy rate to 2.75%, the mid-point of the neutral range of the central bank."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)