Canadian CPI at 30-year highs, USD/CAD bears remain in control

Canada’s annual inflation rate just rose to 4.8%, its highest level since 1991 - how will that impact USD/CAD?

Canada

In an otherwise quiet morning for economic data, Canada released its closely-watched CPI data for December. On a headline basis, prices actually fell -0.1% month-over-month as expected, but you can bet that the evening news will latch onto the fact that today’s reading drove Canada’s annual inflation rate to 4.8%, its highest level since 1991!

USD/CAD traders have taken the as-expected print in stride, focusing instead on the general risk appetite in the market and the fact that the price of crude oil (Canada’s most important export) is trading at its highest level since October 2014.

From a technical perspective, the North American pair has confirmed its Head-and-Shoulders pattern by breaking below the neckline at 1.2620, as my colleague Joe Perry anticipated last week. Using a “measured move” projection of 340 pips (the height of the formation) points to a bearish objective near the previous support levels from June and October in the 1.2290 zone:

FXUSDCAD01192022

Source: TradingView, StoneX

It remains to be seen whether USD/CAD will ultimately extend its decline all the way below 1.2300, but as long as oil prices and economic data remains strong, the path of least resistance in USD/CAD remains to the downside. Speaking of economic data, these are the relevant reports to watch for the rest of this week (all times Eastern US):

Thursday

8:30: US Philly Fed Manufacturing Index

10:00: US Existing Home Sales

11:00: EIA Crude Oil Inventories

Friday

All day: Annual World Economic Forum Meetings

8:30: CA Retail Sales

 

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account