HomeForex UpdatesCanadian Inflation Stays Excessively Excessive. What Does It Imply For USD/CAD?

Canadian Inflation Stays Excessively Excessive. What Does It Imply For USD/CAD?

The Canadian CPI print confirmed what the markets had already anticipated: that inflation continues to rise and can pressure the BOC to lift charges additional.

Final week, the Financial institution of Canada’s Toni Gravelle stated that it’s potential that the Financial institution of Canada might have to lift charges above impartial as a result of the economic system might turn into much less delicate to charge hikes.  On Wednesday, Canada launched CPI for April and the info backs up Gravelle’s view to hike charges.  The headline print was 6.8% YoY vs an expectation of 6.7% YoY and 6.7% YoY in March.   This was the best improve since January 1991.  As well as, Core CPI beat expectations by an excellent bigger margin. The print was 5.7% YoY vs and expectation of 5.4% YoY and March’s print of 5.5% YoY. That is the best degree for the Core quantity EVER!  As a reminder, the Financial institution of Canada raised charges on April 13th by 50bps to 1% and stated that extra charge hikes might be mandatory as demand will increase and inflation persists effectively above the BOC’s goal of two%.  The following BOC assembly is June 1st.

On a day by day timeframe, USD/CAD had been buying and selling in a sideways channel between 1.2453 and 1.2965 since mid-November 2021.  On Could 5th, the pair broke above the highest trendline of the channel and reached a excessive of 1.3077 on Could 12th, just under the 127.2% Fibonacci extension from the highs of December 20th, 2021 to the low of April 5th, close to 1.3116.  Nevertheless, to date, the transfer has proved to be a false breakout as worth bought off for the subsequent three consecutive day and moved again into the vary.

Supply: Tradingview, Stone X

On a 240-minute timeframe, USD/CAD has been shifting larger in an upward sloping channel of its personal since April 21st.  Nevertheless, on Could 16th, the pair broke under the channel and pulled again to 38.2% Fibonacci retracement from the lows of April 21st to the highs of Could 12th, close to 1.2840.  If worth continues to maneuver decrease, first assist is on the 50% retracement from the identical timeframe close to 1.2767, then double backside assist at 1.2725.  If worth breaks under there, it could possibly fall to the 61.8% Fibonacci retracement from the not too long ago talked about timeframe close to 1.2695. Nevertheless, if the present transfer proves to be only a pullback within the uptrend, first resistance is on the backside trendline of the upward sloping channel close to 1.2950, then the current highs at 1.3077.  If worth breaks above, it could possibly then transfer to the 127.2% Fibonacci extension talked about on the day by day timeframe close to 1.3116.

Supply: Tradingview, Stone X

Discover within the backside pane on the 240-minute chart that USD/CAD and Crude Oil are as soon as once more in a strongly correlated detrimental relationship with a studying of -0.81.  Any readings under -0.80 are thought-about sturdy.  Due to this fact, because of this on a shorter timeframe, when Crude Oil strikes in a single path, USD/CAD ought to transfer in the other way.  Observe that that is just for the 240-minte timeframe.  On a day by day timeframe the present correlation is close to 0, which implies there is no such thing as a relationship in any respect.  If the sturdy detrimental relationship continues on the shorter timeframe, it might transfer to the longer day by day timeframe.

The Canadian CPI print confirmed what the markets had already anticipated: that inflation continues to rise in Canada and can pressure the BOC to lift charges additional.  Nevertheless, you will need to watch the current worth motion in USD/CAD.  Is that this this only a pullback in an uptrend or will this be a deeper correction?  The path of crude oil on a 240-minute timeframe might present clues.

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