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
- 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.
- Above expectations: 0.3% to 0.6%: A reading above expectations could push the pair below one support level.
- Well above expectations: Above 0.6%: An unexpectedly sharp rise in inflation could push USD/CAD downwards, breaking two or more levels of support.
- Below expectations: -0.8% to -0.5%: A weak release could push USD/CAD upwards, with one resistance level at risk.
- 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.