Home Sports The Canadian dollar is vulnerable to another slowdown in Canada’s CPI

The Canadian dollar is vulnerable to another slowdown in Canada’s CPI

88
0

Topics for conversation about the Canadian dollar

Recent developments in the Relative Strength Index (RSI) increase the scope for a short-term pullback in the USD/CAD as the oscillator reverses ahead of 70, but an update in the Canadian Consumer Price Index (CPI) could keep the exchange rate afloat as inflation is expected to slow for a third straight month.

The Canadian dollar is vulnerable to another slowdown in Canada’s CPI

USD/CAD returns bullish reaction to US Consumer Price Index (CPI) to track the bounce between commodity bloc currencies and the exchange rate may struggle to sustain gains from the monthly low (1.3503) as the RSI moves away from overbought territory.

As a result, USD/CAD could threaten its monthly opening range as bullish momentum fades, but another drop in Canada’s CPI could support the exchange rate as core inflation is expected to ease to 6.8% in September from 7.0% on the year for the previous month.

Signs of easing price pressures could weigh on the Canadian dollar as it encourages the Bank of Canada (BoC) to end its hiking cycle, and it remains to be seen whether Gov. Tiff Macklem and Co. will adjust forward guidance at the next rate decision on October 27, as the central bank is due to publish an updated monetary policy report (MPR).

Until then, speculate for less BoC rate jumps could keep USD/CAD afloat as the Federal Reserve continues to tighten, but a larger pullback in the exchange rate could continue to dampen swings in retail sentiment, as it did earlier this year.

The IG Client Sentiment Report (IGCS). shows that 42.86% of traders are currently net long USD/CAD, with a 1.33 to 1 ratio of short to long traders.

The number of net-long traders is 37.39% higher than yesterday and 19.78% higher than last week, while the number of net-short traders is 10.29% lower than yesterday and 23 .24% lower than last week. The rise in net-long interest has helped mitigate the crowding behavior, as only 31.05% of traders were net-long USD/CAD last week, while the decline in net short positions comes as the exchange rate retraces its advance from last week.

That said, another slowdown in Canada’s CPI could halt recent USD/CAD falls as it fuels speculation for a smaller BoC rate hike, but recent developments in the RSI increase the scope for a short-term pullback in the exchange rate as the oscillator reverses ahead of overbought territory.

Introduction to technical analysis

Sentiment on the market

Recommended by David Song

USD/CAD Daily Chart

Source: Trade view

  • USD/CAD is consolidating after clearing the opening range in October, but lack of momentum to hold the 1.3630 (38.2% retracement) to 1.3660 (78.6% extension) region could see the exchange rate pull back further as Relative Strength Index (RSI) reverse in front of 70.
  • A break/close below 1.3540 (23.6% retracement) could lead to a test of the monthly low (1.3503), with the next area of ​​interest around 1.3460 (61.8% retracement).
  • However, USD/CAD may continue to consolidate as long as it holds above the 1.3630 (38.2% retracement) to 1.3660 (78.6% extension) area with a move back above 1.3800 (161.8 % expansion) of the handle that will lead to the annual high (1.3978). ) on the radar.

Trading strategies and risk management

Become a better trader

Recommended by David Song

— Posted by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

https://www.dailyfx.com/news/canadian-dollar-vulnerable-to-another-slowdown-in-canada-cpi-20221017.html

Previous articleHow to deal with climax? Embrace it like these women
Next articleFA Cup first round draw: Bracknell Town host Ipswich, Hereford take on Portsmouth | FA Cup