Selling USDCAD with target of 1.3650 on condition of high CPI Canada

16 April 2024 80
Nikolai
Nikolai

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Selling USDCAD with target of 1.3650 on condition of high CPI Canada

USDCAD's upward rally appears to be interrupted by a correction soon.


The pair on the daily timeframe looks overbought, a bearish divergence with the RSI indicator has been formed.


Recall that a sharp strengthening of USDCAD was caused by the U.S. inflation data published last week. U.S. consumer price indices remain strong, which introduces uncertainty and is likely to postpone the beginning of the Fed's monetary policy easing. It is possible that the number of expected easing steps will also decrease.


But any strong price dynamics caused by news impulses sooner or later corrects. What can cause such a correction from a fundamental point of view and in terms of news?


One possible reason might be that the inflation ball is now on Canada's side.

Today, Canada's March CPI will be published and if it shows a similar picture on inflationary pressures, it will create conditions to trigger a reversal in USDCAD and bring the currencies back to some conditional equilibrium.


The previous value of the Canadian Consumer Price Index (year-on-year) was at 2.8%. If today's publication shows the March value above 3.0%, it will create a counter-impulse to the strengthening of the Canadian dollar and a decline in USDCAD.


In addition, the Canadian Consumer Price Index (month-on-month) is expected to be 0.7%, compared to the previous value of 0.3%. Exceeding this expected inflation estimate above 0.7% will strengthen USDCAD downside.

From a technical point of view, the level of 1.3650 is the most possible target for such a decline.


The final recommendation is to sell USDCAD provided the March Consumer Price Index of Canada (year-on-year) is above 3.0%.

Profits should be taken at the level of 1.3650. A Stop-Loss could be set at the level of 1.3900.

The possible loss should not exceed 2% of your deposit funds.

This content is for informational purposes only and is not intended to be investing advice.

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Nikolai
Nikolai

Listed among the best MarketCheese authors
1st in the segment "Oil and gas"
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