Canada is about to print its CPI numbers!
Will the release affect USD/CAD’s short-term downtrend?
Before moving on, ICYMI, yesterday’s watchlist checked out GBP/AUD’s ascending triangle ahead of the U.K.’s CPI report. Be sure to check out if it’s still a valid trade!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
Germany’s ZEW economic sentiment index jumps from 29.9 to 51.7 in Jan.
Eurozone’s ZEW economic sentiment index also higher from 26.8 to 49.4
Canada’s home building 22% slower in Dec. vs. Nov. but “remains high in historical terms”
Australia consumer sentiment slips by 2% to 102.2 in Jan. on Omicron surge
Oil hits seven-year highs after key Iraq-Turkey Oil pipeline was knocked out by explosion
Asia shares drop as Treasury yields hit fresh two-year highs
U.K.’s consumer prices rise by 5.4% - the highest since March 1992 - vs. 5.2% expected and 5.1% in Nov.
Upcoming Potential Catalysts on the Forex Economic Calendar:
U.K.’s house price index at 9:30 am GMT
Canada’s CPI at 1:30 pm GMT
BOE Governor Bailey to give a speech at 2:15 pm GMT
Japan’s trade balance at 11:50 pm GMT
AU MI inflation expectations at 12:00 am GMT (Jan 20)
U.K. RICS house price balance at 12:01 am GMT (Jan 20)
Australia’s labor market data at 12:30 am GMT (Jan 20)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
What to Watch: USD/CAD
I’m already seeing a couple of GBP setups for ya so I decided to set my sights on USD/CAD’s chart ahead of Canada’s CPI release.
Word around is that consumer prices will slow down by 0.1% in December.
Significantly faster-than-expected consumer price increases may prompt traders into pricing in a BOC interest rate hike.
Increased CAD demand could drag USD/CAD lower in the charts.
As you can see, the pair had already gotten rejected at the 1.2550 psychological handle that lines up with a channel resistance and the 38.2% Fibonacci retracement of the last big downswing.
USD/CAD could revisit its January lows or make new monthly lows if we see enough CAD buying or risk-taking.
If traders continue to focus on rising U.S. Treasury yields, though, or if today’s CPI report fails to boost CAD against the dollar, then USD/CAD may retest the resistance triangle and maybe even break above its short-term downtrend.
I’ll be looking at the 1.2560, 1.2625, and 1.2700 levels if we do see a bullish momentum.
