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The Canadian CPI, also known as inflation, is a key  consumer indicator.  It measures the change in the price of goods and services charged to consumers.  A reading that  is higher than  the market forecast is bullish for the Canadian dollar.

Here are all the details, and 5 possible outcomes for USD/CAD.

Published on Friday at 12:30 GMT.

Indicator Background

Core CPI differs from the CPI release in that excludes eight volatile components such as  food and energy prices. The index is important to currency traders, as the Bank of Canada may step in and  adjust interest  rates if inflation targets are not being met. A change in interest rates, in turn, will affect the strength of the Canadian dollar.

Core CPI climbed a modest 0.2% in June. The index has stayed in positive territory since January. but the forecast for the July reading  calls for  a decline of 0.1%. Will the index remain in positive territory this month?

Sentiments and levels

Canada’s economy  continues to be relatively strong, and the  loonie  held its own despite the troubles in Europe. With oil remaining stable and even moving higher, the  Canadian dollar  could make inroads against its US counterpart. Thus, the overall sentiment is bearish on USD/CAD towards this release.

Technical levels, from top to bottom: 1.0245, 1.02, 1.0150, 1.0030, 1 and 0.9950.

5 Scenarios

  1. Within expectations: -0.4% to 0.2%: In this scenario, USD/CAD could show some slight fluctuation, but it is likely to remain within range,  without breaking any levels.
  2. Above expectations: 0.3% to 0.6%: A reading above expectations could  push the pair  below one  support level.
  3. Well above expectations: Above 0.6%: An unexpectedly sharp rise in inflation could push USD/CAD downwards, breaking two or more levels of support.
  4. Below expectations: -0.8% to -0.5%:  A weak release could push USD/CAD upwards, with one resistance level at risk.
  5. Well below expectations: Below -0.8%: A reading deep in negative territory would likely hurt the loonie, and the  pair could break two  or more resistance levels.

For more on the Canadian dollar, see the  USD/CAD forecast.