Loonie Paused Prior CPI Release Tomorrow

Andreas Thalassinos
Andreas Thalassinos

19.2.2024

The Loonie is currently taking a breather before the release of important economic reports that may pull the USDCAD to higher exchange rates.
Traders will closely monitor the currency pair in light of the significant economic data that is set to be released tomorrow, which may have an impact on the currency valuations.

Overview

The Loonie is currently taking a breather before the release of important economic reports that may pull the USDCAD to higher exchange rates.
Traders will closely monitor the currency pair in light of the significant economic data that is set to be released tomorrow, which may have an impact on the currency valuations.

Upcoming Fundamental Events

Tuesday 13:30 (GMT): Consumer Price Index (m/m)
Tuesday 13:30 (GMT):  Median CPI (y/y)
Tuesday 13:30 (GMT):  Trimmed CPI (y/y)
Tuesday 13:30 (GMT):  Common CPI (y/y)
Tuesday 13:30 (GMT):  Core CPI (m/m)

Fundamentals

The previous Consumer Price Index (CPI) experienced a year-over-year increase of 3.4%, surpassing the 3.1% rise observed in November. This data showcases the progression of inflation within the economy, indicating a rise in the general level of prices for goods and services consumed by Canadian households. These changes in the CPI are crucial for businesses and policymakers to comprehend as they provide an overview of the current state of the economy and assist in planning for future economic developments.

The Consumer Price Index (CPI) is expected to attract significant attention from market participants as it may offer insight into the policy stance of the Bank of Canada (BoC). The central bank is seeking evidence of further moderation in inflation before contemplating and initiating a discussion on rate cuts.

The BoC left the policy interest rate unchanged at 5.0% at its January meeting without disclosing a timeline for interest rate cuts.

Technical Analysis

Since December 27, the USDCAD has been experiencing an upward trend, with the low price of 1.31772 marking the beginning of this trajectory. However, the currency pair started to slow down, as hinted by the negative divergence between the price and the Momentum Oscillator, causing prices to retreat and find support on the Moving Average line. Despite this pause in the upward direction, the USDCAD is expected to continue its ascent as long as the bulls remain in control. The positive outlook is further supported by both the 50-period Moving Average and the Momentum Oscillator.
A close above the 1.35418 and 1.35861 peaks formed on January 17 and February 13, respectively, will clear the way for an upside breakout and continuation of the upward direction. 
Conversely, a decisive close below the swing low of 1.34125 will pave the way for lower exchange rates.

Potential Upside Targets

Should the buyers maintain control of the market, then four potential price targets may be estimated.

1.35418: The first price objective stands at 1.35418, aligning with the peak formed on January 17.
1.35861: The second price objective is estimated at 1.35861, representing the year's high formed on February 13.
1.36544: An additional price objective may be determined at 1.36544, which corresponds to the 423.6% Fibonacci extension traced from the swing top at 1.33719 all the way down to the swing bottom at 1.32870.
1.37257: The fourth price target is seen at 1.37257, representing a resistance estimated by utilizing the weekly Pivot Points.

Potential Downside Targets

1.33052: The first downside target is the 161.8% Fibonacci extension from the swing bottom at 1.34125 to the swing top at 1.35861.
1.31316: This one aligns with the 261.8% Fibonacci extension of the same swing mentioned above.

Conclusion and Considerations

All eyes are on the Canada Consumer Price Index announcement, as it will provide insights into the policy stance of the Bank of Canada (BoC). It is imperative that traders stay abreast of the latest geopolitical and economic developments, exercise caution, and maintain a keen eye on the market trends to make the most of their investments and avoid any potential risks or losses. 
 

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Andreas Thalassinos
Andreas Thalassinos

Andreas Thalassinos is a recognized authority in the financial markets and world renowned for his expertise in algorithmic trading. He is a Certified Technical Analyst and highly respected lecturer in the education of traders, investors, and financial markets professionals. Thalassinos has played a key role in the development of education within the industry, training tens of thousands of traders of all skill levels. Traders value his seminars and workshops for the rich content, his passionate, charismatic, and lively presentations.