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USD/CAD to Mount Larger Advance on Slowing Canada Inflation

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by , 07-22-2016 at 11:48 AM (1082 Views)
      
   
Trading the News: Canada Consumer Price Index (CPI)

Another downtick in Canada’s headline & core Consumer Price Index (CPI) may push USD/CAD to fresh weekly highs as it puts pressure on the Bank of Canada (BoC) to further embark on its easing cycle.

What’s Expected:

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Why Is This Event Important:

Even though BoC Governor Stephen Poloz largely endorses a wait-and-see approach for monetary policy, the central bank may keep the door open to further reduce the benchmark interest rate as the Canadian economy continues to adjust to the oil-price shock.

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

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  • USD/CAD may continue to face range-bound prices as it largely preserves the wedge/triangle formation from earlier this year, with the pair capped around 1.3130 (38.2% retracement), while near-term support comes in around 1.2620 (50% retracement) to 1.2650 (50% retracement).
  • Key Resistance: 1.3560 (100% expansion) to 1.3630 (38.2% retracement)
  • Key Support: 1.2510 (78.6% retracement) to 1.2520 (38.2% expansion)


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