DailyFX.com -

- Canada Headline Inflation to Hold Above 2.0% for Fifth Consecutive Month.

- Core Consumer Price Index of 1.9% Would Mark Fastest Pace of Growth Since June 2012.

Trading the News: Canada Consumer Price Index (CPI)

Despite expectations for a downtick in Canada’s Consumer Price Index (CPI), the stickiness in core inflation may spur a larger decline in the USD/CAD as it puts increased pressure on the Bank of Canada (BoC) to move away from its neutral policy stance.

What’s Expected:

USD/CAD CPI

Click Here for the DailyFX Calendar

Why Is This Event Important:

Even though BoC Governor Stephen Poloz talked down the risk for higher interest rates, the growing risk for a prolonged period of above-target inflation may push the central bank to adopt a more hawkish tone for monetary policy in an effort to promote price stability.

For more updates, sign up for David's e-mail distribution list.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Wholesale Trade Sales (MoM) (JUN)

1.0%

1.6%

Manufacturing Sales (MoM) (JUN)

0.4%

0.6%

Retail Sales (MoM) (MAY)

0.6%

0.7%

The pickup in private sector consumption may heighten price pressures in Canada, and a strong inflation print may spur a more meaningful correction in the USD/CAD as it boosts interest rate expectations.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Average Weekly Earnigns (YoY) (MAY)

--

2.6%

BoC Senior Loan Officer Survey (2Q)

--

-12.8

Business Outlook Future Sales (2Q)

30.00

24.00

Nevertheless, slowing wage growth paired with the ongoing weakness in private lending may spur a softer-than-expected CPI print, and a marked slowdown in price growth may trigger a more meaningful run at the 1.1100 handle as it dampens bets for higher interest rates.

How To Trade This Event Risk(Video)

Bullish CAD Trade: Core Inflation Expands 1.9% or Higher

  • Need red, five-minute candle following the CPI report to consider short USD/CAD entry
  • If the market reaction favors a bullish Canadian dollar trade, establish short with two position
  • Set stop at the near-by swing high/reasonable distance from cost; use at least 1:1 risk-to-reward
  • Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bearish CAD Trade: CPI Report Falls Short of Market Forecast

  • Need green, five-minute candle following the release to look at a long USD/CAD trade
  • Carry out the same setup as the bullish loonie trade, just in the opposite direction

For LIVE SSI Updates Ahead of Canada’s Inflation Report, Join DailyFX on Demand

Potential Price Targets For The Release

USD/CAD Daily

USD/CAD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite bullish break in RSI, downside remains favored given series of lower highs & lows.
  • Interim Resistance: 1.1000 (38.2% retracement) to 1.1020 (23.6% retracement)
  • Interim Support: 1.0820 (61.8% retracement) to 1.0830 (61.8% retracement)

Read More:

Make or Break Time for USDCHF- Rally Vulnerable Sub 9133

Price & Time: NOK Bucks the Trend

Impact that the Canada CPI report has had on CAD during the last month

Period

Data Released

Survey

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JUN

2014

07/18/2014 12:30 GMT

2.3%

2.4%

-25

-31

June 2014 Canada Consumer Price Index (CPI)

USD/CAD Chart

The annualized inflation rate hit a two-year high of 2.4%, beating an average estimate of 2.3%. The core Consumer Price Index (CPI) reading also exceeded market forecast and climbed 1.8% after expanding 1.7% in May. Bank of Canada Governor Stephen Poloz stressed that the faster rate of price growth was mainly due to transitory factors, including energy and import costs, and expects inflation to slow over the next two years as the central bank retains a “neutral” view for monetary policy. The Canadian dollar jumped following the better-than-expected print, with USD/CAD dipping below the 1.0710 handle. After a quick comeback, the pair moved sideways during the rest of the North American trade and closed at 1.0727.

Related Articles
  1. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  2. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  3. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  4. Investing

    Financial News Comparison: Bloomberg Vs. Reuters

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  5. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
  6. Forex Education

    The Top Uses For P2P Currency Exchange

    Peer-to-peer (P2P) currency exchange networks offer a viable and cheaper alternative for buying and selling currencies.
  7. Forex

    Steps To Open An Offshore Forex Account

    Here is a simple breakdown of how to open an offshore forex account for US-based users, including legal requirements.
  8. Entrepreneurship

    Top Forex Trading Apps

    A brief overview of the top apps that help forex traders with on time information, charts and more.
  9. Investing Basics

    The Risks Of Buying Bitcoin

    Virtual currency is probably here to stay, but what about Bitcoin specifically? Does it have a first-to-market advantage? What are the risks involved?
  10. Forex News

    How The Forex "Fix" May Be Rigged

    When it comes to forex, some types of "fixes" are legal. But some really aren't.
RELATED TERMS
  1. No results found.

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!