Selling USD/CAD, As CPI Inflation Beats Expectations in Canada

CPI inflation came stronger than expected in Canada and the 100 SMA was providing resistance, so we decided to open a sell signal in USD/CAD

Skerdian Meta•Wednesday, October 19, 2022•2 min read

Lower core PCE inflation helping stock markets

USD/CAD resumed the bullish trend by the middle of August and it made some massive gains until early this week, climbing more than 12 cents in total. Although in the last several days this pair has been trading sideways and after the attempt to push higher last week which failed, it seems like the situation might be changing.

The highs are getting lower and now moving averages have turned from support into resistance. The 100 SMA (green) provided support earlier this week, and today it rejected the price again, so it has turned into a resistance indicator.

USD/CAD H1 Chart – The 100 SMA Turns Into Resistance

MAs rejecting USD/CAD again today

A while ago we decided to open a sell forex signal here, as the 100 SMA (green) was rejecting the price on the H1 chart. So moving averages are turning from support into resistance, which shows that sellers are getting stronger. Consumer inflation (CPI) from Canada came stronger than expected, despite a tick lower in the headline number in September. This should keep the Bank of Canada (BOC) on the tightening cycle.

Canada CPI Inflation Report

<h5 class="content-data__caption"><strong>Canada headline CPI</strong></h5>

September CPI 6.9% YoY vs. 6.8% estimate
August CPI was 7.0%
CPI MoM 0.1% vs. 0.0% expected
CPI year on year rose 6.9%. This was the 3rd consecutive monthly decline in headline inflation. Gasoline prices are mostly responsible for the deceleration. Higher food prices offset the declines
Gasoline prices drop -7.4% in September. That followed a -9.6% decline in August (3rd consecutive month over month decline for gasoline). Year-over-year gasoline prices rose 13.2% down from 22.1% in August
Food prices rose year on year rose 11.4% which was the fastest year-over-year since August 1981 1 prices rose 11.9%

Core measures

Core CPI year on year 6.0% vs. 5.8% last month
Core CPI month-to-month 0.4% vs. a 0.0% last month
Median CPI 4.7% vs. 4.7 last month (revised from 4.8%
Trimmed CPI 5.2% vs. 5.2% last month
Common CPI 610% vs. 6.0% last month

USD/CAD Live Chart

USD/CAD

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.