CAD – Lower-than-expected CPI data supports Bank of Canada's cautious stance

Statistics Canada reported on Monday that Canada's Consumer Price Index (CPI) rose 2.4% year-on-year in March from 1.8% in February, below market expectations of 2.5%. The CPI rose 0.9% month-on-month in March, following a 0.5% increase in February. The Bank of Canada's core CPI, excluding volatile food and energy prices, rose 2.5% year-on-year, compared to 2.3% in February. The market reacted limitedly to the inflation data. However, the data may attract the attention of the Bank of Canada's Monetary Policy Committee and could potentially bring the possibility of an interest rate hike back onto the agenda. The Bank of Canada has cumulatively lowered interest rates by 2.75% over the past two years.

Since the beginning of April, the USD/CAD pair has been trending downwards, largely due to a weaker US dollar and investor optimism regarding a resolution to the Middle East conflict, rather than the strength of the Canadian dollar itself. Technically, the RSI and Stochastic Oscillator are still declining, and the 5-day moving average has crossed below the 10-day moving average, forming a bearish crossover, suggesting a continued tendency for the exchange rate to fall in the short term. Near-term support levels to watch are 1.3650 and 1.3570, with key support at 1.35 and 1.3380. The resistance levels will be seen at 1.3790 and 1.39, with key levels remaining at 1.3950/1.40, followed by an estimated resistance at 1.4140.

Forecasted range:
Resistance: 1.3790 - 1.3900 - 1.3950/1.4000 – 1.4140
Support: 1.3650 – 1.3570 – 1.3500 – 1.3380

This Week's News Highlights:
20/4 Canada's March CPI rose 2.4% year-on-year and 0.9% month-on-month
Friday: Canada's February Retail Sales (20:30)

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