Investors have scaled back their wagers on interest rate cuts amid strong US economy, making their bets that policymakers are wary of premature policy easing. Last Friday, the US dollar moved up again after data showed that US payrolls unexpectedly expanded in March by the most in nearly a year.
As a result, investors will focus on Wednesday's Consumer Price Index report as the next key event that will determine whether inflationary pressures have stabilized.
Fed Chair Jerome Powell has said that the central bank won’t ease policy until it has more confidence that inflation is moving sustainably toward its 2% target. But the Fed has also continued to pencil in three quarter-put cuts this year and Powell has emphasized that policymakers are ready to swoop in — if needed — to prevent an unexpected deterioration of the job market.
Economists forecast that the CPI data on Wednesday will show some easing of inflation pressures. On a monthly basis, both the overall and core reading — which excludes food and energy costs — are projected to have risen by 0.3% in March, down from 0.4% in February, according to economists surveyed by Bloomberg.
Yet CPI (YoY) is projected at 3.4%, well above the Fed’s comfort zone, particularly given the recent jump in oil prices.
If the actual inflation figure is lower than the previous value of 3.2%, it will weaken the US dollar, including in the USDCAD pair.
From a technical point of view, the USDCAD pair is moving in an ascending equidistant channel and the publication of a low CPI value could push the price to the lower boundary of the channel.
The final recommendation is to sell USDCAD, if the actual value of the CPI in the US (YoY) is below 3.2%.
The profit could be fixed at the level of 1.3520.
A Stop-loss could be placed at the level of 1.3700. It’s suggested to limit the trading volume to no more than 2% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
