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Near Term sure to Produce Volatile Forex Fireworks

Important inflation data will be published in Canada today which will likely cause volatility in the USD/CAD.

 

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The USD/CAD is trading near the 137575 mark as of this writing.  The USD/CAD began the early morning lower near the 1.37225 ratio, this after seeing a low of around 1.36510 early on Tuesday. The incremental climb upwards likely isn’t surprising speculators, who also saw the USD/CAD challenge the 1.39760 mark last Thursday.

Consumer Price Index data will be published in Canada Today and affect the USD/CAD

Inflation is a global concern and today CPI statistics will be published in Canada. The USD/CAD will certainly be affected by this outcome, and trading will likely mirror the rather nervous sentiment that continues to linger in the Forex market. It would not be surprising to see whipsaw action take place today. If there is a surprise result via the inflation data this would definitely cause fireworks in the USD/CAD.

It should also be remembered that next Wednesday the Bank of Canada will release their Monetary Policy Report, along with the Overnight Rate.  For the time being the BoC is anticipated to raise their interest rate by ‘only’ 0.50% to 3.75%, but if today’s inflation data should come in stronger than expected than financial houses which have positioned for a half a percent increase may have to react rather quickly. 

Volatility should be prepared for by Speculators within the USD/CAD

  • Although it is possible early consolidation will be seen in the USD/CAD as financial houses wait for the inflation numbers, there is no guarantee. Traders must be ready for sudden volatility with secure risk management today.
  • Speculators should anticipate very fast trading conditions during the CPI data releases and conservative traders may want to sit on the sidelines and watch the dynamic results until the smoke clears.

The price range of the USD/CAD remains within the upper tier of its rather long term range. The ability of the USD/CAD to climb higher was certainly proven last week, but the reversal lower since the apex highs of last Thursday have seen resistance levels decrease technically. If inflation numbers come in weaker than expected, there is reason to believe the USD/CAD could see more bearish action. However, traders who anticipate weaker inflation will be playing with fire possibly if the data goes against them.

If inflation numbers come in near expectations an almost calm market may return for the USD/CAD today, as traders gear their positions towards the Bank of Canada’s rate pronouncements next week. However, if inflation numbers come in higher than expected speculators should be braced for rather fast price action as financial houses worry about a stronger than forecasted interest rate hike next week. The 1.37350 to 1.37850 price range will likely see choppy trading, but this realm is likely to burst after the CPI statistics are published today.

Canadian Dollar Short Term Outlook:

Current Resistance: 1.37890

Current Support: 1.37325

High Target: 1.38455

Low Target: 1.36525

USD/CAD

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