Previously on Monday, the Canadian dollar weakened to a four-day low against its US counterpart, despite a surge in crude oil prices. One of the reasons was that the greenback surged broadly on improving global risk appetite.

The US dollar rallied against a basket of currencies as risk sentiment steadily recovered following a week of turbulence in hopes that major central banks would look to launch fresh stimulus measures to boost their sluggish economies.

Today is likely to be an important day for USD/CAD as investors await Canadian CPI data along with FOMC meeting minutes from the Federal Reserve. Both are high impact events and may drive sharp fluctuations in the market.

The yearly inflation rate in Canada declined to 2% in June 2019 from 2.4% in the prior month and in line with market forecasts, as costs decreased for defense and transportation, while energy prices declined further.

CPI data is expected to rise from -0.2% to 0.1%, which may underpin support to the Loonie.

How to Trade USD/CAD?

On the 4-hour chart, the Canadian dollar is facing strong resistance around 1.3350. It’s a triple top level and has given a hard time to USD/CAD. On the lower side, a bullish trendline is supporting USD/CAD around 1.3250.

A CPI figure of more than 0.3% may drive further sell-off in the USD/CAD, making it drop further towards 1.3240.

CPI figure of less than 0.1% will extend bullish rally until 1.3340 resistance, and can also trigger a bullish breakout. In that case, USD/CAD may rally towards 1.3380.

Stay tuned to FX Leaders Economic Calendar for live coverage of the Canadian CPI data!