Today, the November reading of Canada's consumer price index will be released. Inflation is expected to decline across the group of indices. Today, the central banks of the world's leading economies are beginning to turn toward easing monetary policy. The Fed was the first to make relevant statements. The Bank of England and the ECB made statements, which did not contain any clear intentions to start monetary easing, but made it obvious that it is only a matter of time.
Speaking about Canada, one should first of all note the high degree of integration of its economy with the U.S. economy. In fact, they are a single economic organism with synchronized development cycles. Accordingly, common monetary policy conditions are suitable for them.
Based on such assumptions, it is reasonable to expect the Bank of Canada to follow the Fed in lowering the key rate.
The key rate in Canada now equals 5.0% compared to the Fed's rate of 5.5%.
The next Bank of Canada meeting, which could possibly include statements about following the Fed's trajectory, is scheduled for next year. But today's CPI values can anticipate the direction of these statements.
The current technical picture of USDCAD indicates that the pair is in the oversold zone. Today's CPI statistics can bring the quotes back up to the level of the conditional balance, if it turns out to be not worse than the forecasted values.
USDCAD has an untested price level at 1.3475. This level is likely to be the target to which the pair will rush if the CPI figures confirm that inflationary pressures in the Canadian economy have been reduced.
The overall recommendation is to buy USDCAD provided that the actual CPI values of Canada will not be worse than forecast. Profit should be fixed at the level of 1.3475. Loss should be fixed at the level of 1.3300.
This content is for informational purposes only and is not intended to be investing advice.
