CAD CPI Due
The Loonie is on watch today as traders prepare to receive the latest Canadian inflation data. Ahead of the release, the market is currently pricing in just a 30% chance of a cut from the BOC next month. If annualised CPI holds at 3.1% (median) and 3% (trimmed), as expected, this should keep easing expectations muted, allowing CAD room to move higher. Given the market’s dovish Fed expectations, a greater divergence in outlook between the BOC and Fed should see USDCAD dropping lower near-term. If CAD inflation data undershoots forecasts, however, this could cause some repricing in the BOC rates outlook, putting pressure on CAD near-term.
Fed & Jackson Hole
With the FOMC minutes and Jackson Hole meeting ahead this week, there is plenty of room for movement in the Loonie. If today’s CAD inflation data surprises to the upside, and we see dovishness from the Fed through the week, this could see USDCAD falling sharply. On the hand, if CAD inflation undershoots forecasts today and BOC rate cut expectations rise, then we hear a more neutral tone from the Fed through the week, this could lead USD higher while CAD retreats. CAD could also come under pressure if oil prices start to move lower on any growing optimism over a potential Russia/Ukraine peace deal.
Technical Views
USDCAD
For now, the market remains in an inverse head and shoulders formation following the breakout above the falling wedge pattern. 1.3866 is the key level to watch with a break higher here seen opening the way for a run up to 1.4178 next. While this level holds, however, a rotation down towards 1.3618 can still be seen with bulls needing to defend that level to prevent a drop to 1.3448 thereafter.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.