USD Declines Further

The US Dollar Index failed to break above 101.70 resistance area this week, moving per our plan mentioned in our previous reports earlier this week.

The Index slides back all the way to 100.80’s earlier this morning, which confirms the head and shoulder pattern on the daily chart.

In the meantime, we will be watching the index over the coming days for further declines well below 100.0 barrier, which should grant another leg lower toward somewhere around 99.30’s.

On the upside view, any upside rally is likely to be limited below that resistance, where sellers are likely to appear again.

US Session Ahead

During the US session, there are no economic releases from the US, However, we will be watching the Canadian data.

This time it’s the Canadian inflation, which set to have a notable impact on the Canadian Dollar pairs. But traders need to know how to read these figures and how to trade them.

Expectations

Looking at the table above, we can notice that the estimates are somehow mixed. Traders would always look at the MoM CPI and Core CPI. This is useful. You should keep a close eye on the YoY figures more than the MoM.

The entire YoY figures are expected to remain stable, which matters the most today. The YoY Core CPI is expected to remain stable at 1.6% for the second month in a row. However, a surprise higher would be your first sign for a potential trade.

How To Read The Data?

As noted above, look at the YoY figures first, if they are stable as widely expected, then you need to look at the MoM figures.

A positive surprise, especially from the Core CPI, would be significant, as it would be the first positive reading in over three months. The MoM CPI is also expected to rise for the first time in over two months. If so, you need to start planning your trade

Don’t Forget Oil

Crude Oil and the Canadian Dollar are highly correlated, in fact, crude oil movement influence Canadian Dollar pairs.

This means that even if the data were positive, which should push the Canadian Dollar higher. However, if Crude Oil trends changed for any reason, this would overshadow the economic releases, and the Canadian Dollar is likely to trade against the news and against your expectations.

USDCAD Technical Outlook

(Click on image to enlarge)

USDCAD has been trading within a tight range for almost two weeks now, between 1.32 and 1.30, hovering around its 200 DAY MA with no clear break above or below that MA so far.

The indicators are also flat including the RSI, while the Stochastics is crossing over to the downside with falling wedge. This would increase the possibility for further declines ahead.

However, a breakout of the tight range is still needed to clear the way for another push. Meanwhile, we need to keep an eye on 1.30 support area as a break through that support is needed to clear the way for another leg lower probably toward 1.2830’s.

Otherwise, another push to 1.32 would be more likely, especially if Crude Oil failed to sustain its recent gains.

Levels To Watch