Canada CPI comes out a little weaker than expected. USDCAD tests upside resistance.
The Canada CPI for the month of July came out a touch weaker than expected as the month on month index fell by -0.3% versus -0.2% and the YoY measure showed a decline of -0.9%. The Core measures were also lower by a smidge. The MoM core measure came in at 0.0% vs expectation of +0.1% and the YoY came in at +1.8% vs +1.9% expectation. The Bank of Canada targets 2.0% inflation but the decline in inflation is largely due to the decline in energy prices. Nevertheless, there is spare capacity in the economy which should also keep inflation subdued and the BOC on hold as far as interest rates for the foreseeable future.
From a technical perspective the USDCAD first dipped but has since risen post the report. The pair is up on the day. The index transitioned from a non trending period to trending. The pair tried breaking to the downside, but the momentum failed and the market reversed quickly.
The ensuing move to the upside has approached the recent highs and the 200 bar moving average resistance on the 4 hour chart (see green line in the chart below). The price over the last three days now have gone above this moving average. However, each time the price has not been able to sustain any momentum. That MA comes in at the 1.1079 level today (see chart below). A move above this give a bullish bias. Confirmation of the directional move comes when the price takes out the highs from yesterday at the 1.1105 level and the high from Monday at the 1.1123. Keep on eye on these key levels today.
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