USDCAD was 0.25% in today’s session after a failure at resistance led to a near 100 pip drop yesterday. Today sees a key release in the form of Canadian inflation figures.
Inflation expectations for the Canadian economy are for a reading of 0.4%, compared to 0.1% in August. The figures could help the Bank of Canada hold onto its current 0.25% interest rate, which is still one of the highest in the developed nations. The run of inflation rates in the last week or two have come in close to expectations but any deviation could see volatility in the USDCAD.
The Bank of Canada will be under pressure to hold rates at their current levels when they admit that the recovery will be slow and uneven. The Canadian unemployment rate has been falling but is still stuck at 9%, while business sentiment remains at historic lows, according to a BoC survey, which said:
“Firms reported their sales prospects are limited by weak demand and precautionary health guidelines, and that their investment and hiring plans remain Modest due to elevated uncertainty”.
Despite the gloom, the CAD is still stronger due to the optimism for a second stimulus package, which if it doesn’t come before the election, will no doubt come after.
USDCAD Technical Outlook
USDCAD has failed to cross the 50-day moving average and has tumbled lower yesterday. The pair is now testing the 1.3100 support level and this will guide the week ahead. A move lower will test the 1.3000 level that provided support at the September 1st lows in the dollar. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.
USDCAD Daily Chart