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USD/CAD Price Forecast: Signal Ahead of Canada Inflation Data

The USD/CAD remained in a consolidation phase as investors waited for the upcoming Canada inflation data. It was trading at 1.3736 on Wednesday, which was slightly below this month’s high of 1.400. The pair has jumped by more than 8% in 2022 as the US dollar index (DXY) surged. 

Canadian dollar pressured

The USD to CAD exchange rate has been in a tight range this week as the US dollar rally took a breather. This price action is mostly because of the falling volatility as the VIX index plunged to $30. The market has been less volatile because of the relatively positive results by companies like Goldman Sachs and JP Morgan. Also, the removal of UK tax cuts have helped ease global volatility.

Focus now shifts to the upcoming Canada inflation data. Economists polled by Reuters expect the data to show that the headline consumer price index (CPI) dropped by 0.1% on a month-on-month basis. This is expected to translate to an annual increase of 6.8%, which will be lower than the previous 7.0%. Core inflation, which excludes volatile food and energy products, is expected to rise to 5.9%.

A sign that inflation is cooling will likely have an impact on the Bank of Canada as it prepares for it meeting next week. Analysts expect that the bank will hike interest rates by 0.50% in a bid to counter the rising inflation. 

The other key catalyst for the USD/CAD price will be the upcoming American housing starts and building permits data. Economists expect the data to show that permits dropped to 1.53 million while housing starts fell to 1.475 million.

USD/CAD forecast

The USD to CAD exchange rate has been in a tight range recently. On the two-hour chart, we see that it is consolidating around the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved to the neutral point. This price is at the first support level of the standard pivot point. 

Therefore, the pair will likely have a bearish breakout as sellers target the second support of the pivot point at 1.3580. A move above the resistance at 1.3815 will invalidate the bearish view. Subscribe to our cheap and highly accurate S&R indicator for quality USD/CAD trading signals.