Canadian dollar traders will be eagerly awaiting the latest CPI data, due to be released later today. The Bank of Canada was one of the first major central banks to embark on its easing cycle, and the market is looking for signs that it can continue to pull its rates back at coming meetings, with the next rate decision due on 24 July. The monthly data is expected to show a sharp decrease to 0.1% from 0.6%, with the year-on-year number dropping to 2.8% after what had been an unexpected pick-up in the May data. If the key inflation numbers come down in line with expectations, or even lower, then the possibility of another rate cut next week will increase, which should put some pressure on the local currency.
USD/CAD is sitting in the middle of recent ranges, and a CPI print significantly off expectations should see it challenge the range extremities. A lower-than-expected result should see the loonie sell off and the pair challenge resistance around 1.3750, while another surprise higher print should see a sharp rally for the CAD and a threat to short-term support around the 1.3590 level. US retail sales numbers are due to be released at the same time; however, for the CAD, expect the Canadian data to have more of an impact.
Resistance 2: 1.3817 – Long-Term Trendline Resistance
Resistance 1: 1.3758 – Short-Term Trendline Resistance
Support 1: 1.3585 – Short-Term Support and July/May Lows
Support 2: 1.3420 – Long-Term Trendline Support
