Canada’s August CPI rates could shake the Loonie

Peter Iosif, ACA, MBA IronFX

Canada’s August CPI rates in the forefront

US CPI rates for August came in as expected providing little movement in the FX market on Friday, yet inflationary pressures in the US economy remain elevated, providing ground for the Fed to tighten its monetary policy on Wednesday, should it wish so. Also, despite some choppy trading JPY remains strong, allowing for CHF to weaken against the USD, as carry trade seems to be redirected towards the Alps. Such scenario could force the Swiss Franc to continue to weaken over the coming days. Today we turn our attention north of the US border as Canada’s CPI rates for August are to be released. Should the rates accelerate we may see the Loonie getting some support while a slowdown could weigh on the CAD.

Oil prices remain high

Oil prices despite correcting lower on Friday, given the market hopes for diplomacy to ease the tensions in the Middle-East, rose once again in today’s Asian session. New strikes on Saudi Arabian energy infrastructure but also on civilian targets in combination with attacks on vessels at the Strait of Hormuz, allowed for market worries to re-emerge and oil prices to rise. Oil prices rose 7-8% last week, yet renewed or even intensifying tensions in the region could force oil prices even higher.

Other highlights for today

Today we get Sweden’s CPI rates for August, while ECB’s Schnabel and Cipollone are scheduled to speak. In tomorrow’s Asian session we get a slew of Chinese data while RBA’s Hauser is scheduled to speak.

As for the rest of the week

On Tuesday we get UK’s employment data for July and Germany’s ZEW indicators for September. On Wednesday, we get Japan’s machinery orders for July and trade data, UK’s CPI rates, the US retail sales, all for August, Canada’s BoC to release the summary of deliberations of the September meeting and the highlight of the week, the Fed’s interest rate decision. On Thursday we get New Zealand’s GDP rates for Q2, Euro Zone’s final HICP rates for August, from the UK BoE’s interest rate decision, Canada’s business barometer for September and PPI rates for August, the US Philly Fed Business index for September and weekly initial jobless claims figure as well as from the Czech Republic CNB’s interest rate decision. On Friday we get New Zealand’s trade data for August, Japan’s CPI rates for August and BoJ’s interest rate decision, UK’s retail sales and the US industrial output for August.

Charts to keep an eye out

USD/CAD edged higher in today’s Asian session teasing the 1.3880 (R1) resistance line. It’s direction is expected to be affected by the release of Canada’s CPI rates. For the time being we maintain our sideways motion bias yet we also issue a warning for the pair’s bullish tendencies. For the adoption of a bullish outlook we would require the pair to break the 1.3880 (R1) resistance line clearly and start aiming for the 1.3990 (R2) resistance level. Should the bears take over we may see the pair breaking the 1.3730 (S1) support level and start aiming for the 1.3550 (S2) support barrier, yet we consider this scenario as remote at the current stage.

WTI’s price rose during today’s Asian session, after Fridays correction lower, testing the 98.50 (R1) resistance level. We maintain Friday’s bullish outlook for the commodity’s price and intend to keep it as long as the upward trendline guiding it remains intact. We also note that the RSI indicator remains at high levels implying a resilience of the strong bullish market sentiment for WTI. Should the bulls remain in charge, we may see WTI’s price breaking the 98.50 (R1) resistance line and start aiming for the 103.65 (R2) resistance level. Should the bears take over, we may see WTI’s price breaking the 93.30 (S1) support line and start aiming for the 88.60 (S2) support barrier.

Calendar follows

USD/CAD daily chart

Support: 1.3730 (S1), 1.3550 (S2), 1.3420 (S3).
Resistance: 1.3880 (R1), 1.3990 (R2), 1.4125 (R3).

WTI Cash daily chart

Support: 93.30 (S1), 88.60 (S2), 82.00 (S3).
Resistance: 98.50 (R1), 103.65 (R2), 108.85 (R3).

Author

Peter Iosif, ACA, MBA

IronFX

Mr. Iosif joined IronFX in 2017 as part of the sales force. His high level of competence and expertise enabled him to climb up the company ladder quickly and move to the IronFX Strategy team as a Research Analyst. Mr.

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