When is the Canadian consumer inflation (CPI report) and how could it affect USD/CAD?

Canada CPI Overview

Statistics Canada will release the latest consumer inflation figures for February later during the early North American session on Wednesday, at 12:30 GMT. The headline CPI is expected to rise 0.9% during the reported month and the yearly rate is anticipated to accelerate to 5.5% from the 5.1% reported in January.

More importantly, the Bank of Canada's Core CPI, which excludes volatile food and energy prices, is anticipated to edge lower to 0.6% in February from 0.8% in the previous month. The yearly rate is expected to remain well above the central bank's upper target and rise from 4.3% in January to 4.5% during the reported month.

How Could it Affect USD/CAD?

Ahead of the key data, an uptick in oil prices underpinned the commodity-linked loonie and dragged the USD/CAD pair to a fresh weekly low, around the 1.2700 mark, amid a broad-based US dollar weakness. Stronger domestic CPI print should provide an additional lift to the Canadian dollar and pave the way for a further near-term depreciating move for the major. Conversely, softer reading could provide some respite to bullish traders. That said, any immediate market reaction is likely to remain short-lived as the market focus remains glued to the FOMC decision, scheduled to be announced later during the US session.

From a technical perspective, some follow-through selling has the potential to drag the USD/CAD pair towards the 1.2670-1.2665 support. The next relevant support is pegged near the 1.2630 region ahead of the 1.2600 mark. The latter coincides with the very important 200-day SMA and is closely followed by the monthly low, around the 1.2585 region, which if broken will shift the near-term bias firmly in favour of bearish traders.

On the flip side, any attempted recovery move now seems to confront stiff resistance near the 1.2735-1.2740 region ahead of the daily peak, around the 1.2775 area, and the 1.2800 mark. Sustained strength beyond has should lift the pair back towards the weekly top, around the 1.2870 region. Bulls might then aim to conquer the 1.2900 mark and continue pushing spot prices further towards 2021 high, around the 1.2960-1.2965 region touched in December.

Key Notes

  •   USD/CAD Outlook: 1.2700 holds the key for bulls ahead of Canadian CPI, US Retail Sales and FOMC

  •   USD/CAD: More weakness ahead as oil finds ground near $95.00

  •   USD/CAD refreshes weekly low, eyes 1.2700 ahead of Canadian CPI

About Canadian CPI

The Consumer Price Index (CPI) released by the Statistics Canada is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of CAD is dragged down by inflation. The Bank of Canada aims at an inflation range (1%-3%). Generally speaking, a high reading is seen as anticipatory of a rate hike and is positive (or bullish) for the CAD.