Canadian dollar traders are preparing for some volatility in the market later on today, with the key Canadian CPI data being the first major data release of the trading week. These numbers will be heavily analysed by traders and central bankers alike, with any signs that inflation is starting to lift likely leading to more at the Bank of Canada calling for an end to the current easing cycle, despite the problematic jobs numbers.
Market expectation for the month-on-month number is for a 0.3% increase; however, the year-on-year numbers may cause greater moves. Expectation for the median number is for a 3.1% increase, with the trimmed data to come in 3.0% higher, still somewhat away from the central bank’s 2% target.
USDCAD is trading around the 1.3800 level going into the data, and any print +/- 0.2% off the above expectations should see the Loonie break out of recent ranges. The main risk probably sits with a lower print, with the pair sitting near recent highs and a strong trendline resistance level on the daily charts; however, a higher number would swiftly open the way for challenges of recent lows under 1.3750 and a further move south to long-term support levels around the 1.3600 level.
Resistance 2: 1.3879 – August High
Resistance 1: 1.3825 – Trendline Resistance
Support 1: 1.3719 – August Low
Support 2: 1.3599 – Trendline Support
