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USD/CAD forecast: outlook ahead of Canada inflation data

on Apr 18, 2023
  • The USD/CAD exchange rate pulled back on Tuesday.
  • Canada will publish the latest consumer inflation data.
  • Economists expect the data to show that inflation dropped again in March.

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The USD/CAD exchange rate drifted downwards on Tuesday ahead of the upcoming Canada consumer inflation data. It has dropped to a low of 1.3362, which was a few points below this week’s high of 1.3415. This price is ~3.6% below the highest point in March.

Canada inflation data

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The USD/CAD price has been in a strong bearish trend in the past few weeks as the US dollar has plunged. The DXY index, which tracks the greenback against other currencies, has crashed by more than 10% from its highest point in 2022.

The next important CAD news is the upcoming Canada consumer inflation data scheduled for Tuesday. These numbers will show whether the Bank of Canada’s decision to stop hiking interest rates a few months ago is having an impact on prices. 

Economists believe that consumer prices drifted downwards in March, helped by lower energy prices. The median estimate is that the headline consumer price index (CPI) dropped from 5.2% in February of this year. On a MoM basis, analysts expect that inflation rose from 0.4% to 0.5%.

Core inflation, on the other hand, is expected to have dropped from 4.7% to 4.4%. If analysts are accurate, these numbers will mean that the decision to pause rate hikes did not push inflation higher. As a result, other central banks, including the Federal Reserve, could follow in the bank’s footsteps.

There are signs that infation is dropping in most developed countries. Last week, as we wrote here, data showed that the headline inflation in the US dropped to 5.0%, the lowest level since 2021. The same trend has happened in other countries like Australia and Spain.

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The other key Canada news will be a statement by Tiff Macklem, the head of the Bank of Canada. In it, he will likely talk about the inflation data and what to expect later this year.

USD/CAD technical analysis

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USD/CAD chart by TradingView

The 4H chart shows that the USD to CAD exchange rate’s attempts to rebound found a strong resistance at 1.3418 on Monday. This sell-off is being supported by the 25-day and 50-day exponential moving averages and the 78.6% Fibonacci Retracement level. 

The Relative Strength Index (RSI) also failed to move above the neutral point at 50. Therefore, the pair will likely continue falling as sellers target last week’s low of 1.300. A move above the key resistance point at 1.3420 will invalidate the bearish view.


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