Taking a look at the breakdown of the report, seven out of the eight components saw increases during the month, with clothing and shoes tapering the advance, falling some 1.0 percent. Going forward, investors are weighing in a 44 percent chance that the Bank of Canada will hike rates 25 basis points at its next rate decision meeting on September 8th, and are pricing in a 35 basis point increase for the next 12 months, according to the Credit Suisse overnight index swaps. However, expectations leading up to next month’s decision are tapering off as fundamental developments in loonie cool. CAD traders will now shift their focus to retail sales which will be released August 24, 2010.
Canadian Consumer Prices
Source: Bloomberg
Bank of Canada Interest Rate Expectations
Souce: Bloomberg
USD/CAD Daily Chart
Source: Intellicharts
USDCAD: Taking a look at the daily chart, price action has broken above the descending channel which has remained intact since July. However, it is noteworthy that the intraday rally has stalled at the 38.2 percent Fibonacci retracement on the April 21st to May 25th upswing. Going forward, a clear break above 1.0500 may validate a long position towards 1.0640.
Written by Michael Wright, Daily FX ResearchTo Receive Future Articles by Email, please contact me at mwright@fxcm.comMichael Wright is the author of FX Headlines, Fundamentals vs. Technical’s, Weekly Spotlight, and Forex Trading Weekly
DailyFX provides forex news on the economic reports and political events that influence the currency market.
Learn currency trading with a free practice account and charts from FXCM.
