USD/CAD Rate Vulnerable to Sticky Canada CPI

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Canadian Dollar Talking Points

USD/CAD fails to retain the advance from the beginning of the week because it registers a recent month-to-month low (1.3226), and recent information prints popping out of Canada might lead to an extra decline within the alternate price because the Consumer Price Index (CPI) is anticipated to present sticky inflation.

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USD/CAD Rate Vulnerable to Sticky Canada CPI

USD/CAD stays underneath stress following the larger-than-expected slowdown within the US Consumer Price Index (CPI) as indicators of easing inflation fuels hypothesis for a shift within the Federal Reserve’s hiking-cycle, and the alternate price might proceed to trade to recent month-to-month lows because it now not responding to the optimistic slope within the 50-Day SMA (1.3532).

As a consequence, USD/CAD might wrestle to retain the advance from the September low (1.2954) amid rising hypothesis for a smaller Fed price hike in December, and the replace to Canada’s CPI might gasoline the current decline within the alternate price because the headline studying for inflation is anticipated to maintain regular in October.

Canada’s CPI might affect USD/CAD because the gauge is projected to print at 6.9% every year for the second month, and the Bank of Canada (BoC) might come underneath stress to carry its mountain climbing cycle into 2023 because the central financial institution acknowledges that “the demand for goods and services is still running ahead of the economy’s ability to supply them, putting upward pressure on domestic inflation.”

In flip, the BoC might proceed to strike a hawkish ahead steering at its subsequent assembly on December 7 as “the Governing Council expects that the policy interest rate will need to rise further,” however the Canadian Dollar might face an analogous destiny to its US counterpart ought to the replace to Canada’s CPI reveal slowing inflation.

An sudden slowdown in Canada inflation might foster a near-term advance in USD/CAD because it appears to be responding to the former-resistance zone across the July excessive (1.3224), however an extra decline within the alternate price might gasoline the current flip in retail sentiment just like the habits seen earlier this 12 months.

The IG Client Sentiment (IGCS) report reveals 55.56% of merchants are at present net-long USD/CAD, with the ratio of merchants lengthy to quick standing at 1.25 to 1.

The variety of merchants net-long is 15.91% decrease than yesterday and 13.75% decrease from final week, whereas the variety of merchants net-short is 1.99% decrease than yesterday and 31.64% decrease from final week. The fall in net-long place comes as USD/CAD registers a recent month-to-month low (1.3226), whereas the decline in net-short curiosity has fueled the current shift in retail sentiment as 44.61% of merchants have been net-long the pair final week.

With that mentioned, USD/CAD might wrestle to retain the advance from the September low (1.2954) if Canada’s CPI raises the BoC’s scope to pursue a restrictive coverage, however lack of momentum to push under the July excessive (1.3224) might lead to a near-term advance within the alternate price because the former-resistance zone acts as help.

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USD/CAD Rate Daily Chart

Source: Trading View

  • USD/CAD continues to trade to recent month-to-month lows because it now not responds to the optimistic slope within the 50-Day SMA (1.3532), with a break/shut under the 1.3200 (38.2% growth) to 1.3220 (100% growth) area opening up the Fibonacci overlap round 1.2980 (61.8% retracement) to 1.3040 (50% growth).
  • Failure to defend the September low (1.2954) might push USD/CAD in direction of the overlap round 1.2830 (38.2% retracement) to 1.2880 (61.8% growth), however ;ack of momentum to trade under the July excessive (1.3224) might curb the current decline within the alternate price because the former-resistance zone acts as help.
  • A transfer again above the 1.3290 (61.8% growth) to 1.3310 (50% retracement) area brings the 1.3400 (61.8% retracement) deal with again on the radar, with the following space of curiosity coming in round 1.3460 (61.8% retracement).

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— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong





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