USD/CAD: Trading the Canadian Core CPI Release

USD/CAD: Trading the Canadian Core CPI Release

The Canadian CPI, also known as inflation, measures the change in the price of goods and services charged to consumers. Core CPI excludes eight volatile components, notably food and energy.  A reading that exceeds the market forecast  is generally bullish for the Canadian dollar.

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

Published on Friday at 11:00 GMT.

Indicator Background

The Core CPI indicator is important to currency traders, as the Bank of Canada may raise interest rates if inflation is on the rise, thus making the Canadian dollar more attractive to investors.

September’s Core CPI was forecast at 0.4%, and came in at 0.1%. The forecast for October is for 0.2%, so the market is not expecting any dramatic news on the inflation front.

Sentiments and levels

Canada’s economy has shown some improvement of late. Unemployment is down, and important indicators such as housing starts are up. The loonie has also benefited, and is close to par with its US counterpart. Thus, the overall sentiment is bearish on USD/CAD towards this release.

Technical levels, from top to bottom: 1.05, 1.0360, 1.02, 1.0080, 99.15 and 97.80.

5 Scenarios

  1. Within expectations: 0% to 0.6%: 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: 0.7% to 0.9%: A reading above expectations would be an indication  of greater inflation,  and could  push the pair  below one  support level.
  3. Well above expectations: Above 0.9%: An unexpectedly sharp rise in inflation could trigger higher interest rates, pulling USD/CAD downwards, breaking two or more levels of support.
  4. Below expectations: -0.3% to -0.1%: A reading in negative territory could push USD/CAD upwards, with one resistance level at risk.
  5. Well below expectations: Below -0.3%: Such a reading would hurt the loonie, and the  pair could break two  resistance levels or more.

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

Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.