TheNews

Trading the News: Canada Consumer Price Index (CPI)

A slowdown in Canada’s headline & core Consumer Price Index (CPI) may drag on the loonie and fuel the near-term advance in USD/CAD as it puts pressure on the Bank of Canada (BoC) to further support the real economy.

What’s Expected:

Why Is This Event Important:

Even though BoC Governor Stephen Poloz sticks to the sidelines in 2016 and largely endorse a wait-and-see approach for monetary policy, the central bank may revert back to its easing cycle in an effort to encourage a stronger recovery.

How To Trade This Event Risk

Bearish CAD Trade: Headline & Core Rate of Inflation Slows in May

• Need to see green, five-minute candle following the release to consider a long trade on USD/CAD.
• If market reaction favors a bearish loonie trade, buy USD/CAD with two separate position.
• Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
• Move stop to entry on remaining position once initial target is hit; set reasonable limit.

Bullish CAD Trade: Canada CPI Report Beats Market Forecast

• Need red, five-minute candle to favor a short USD/CAD trade.
• Implement same setup as the bearish Canadian dollar trade, just in reverse.

Potential Price Targets For The Release
USD/CAD H4



Canada’s Consumer Price Index (CPI) climbed an annualized 1.7% in April following the 1.3% expansion the month prior, while the core rate of inflation unexpectedly advanced 2.2% during the same period amid forecasts for a 2.0% print. A deeper look at the report showed transportation costs increased 2.0% as energy prices climbed 3.8%, while prices for clothing and footwear held flat in April, with food costs falling 0.5% following a 0.3% contraction in March. Despite the stronger-than-expected CPI report, the Canadian dollar struggled to hold its ground, with USD/CAD climbing back above the 1.3100 handle to end the day at 1.3107.

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