USD/CAD made a reversal higher at the end of July and has been on a bullish trend throughout August, as USD buyers seem to be back after the last FED meeting. The dips are finding buyers for this pair, keeping the buying momentum going, despite the rise in crude Oil prices until last week.

Looking at the daily chart, we can see that moving averages have been doing a good job as support since the beginning of this month. We have also been long for a couple of weeks, buying during dips at moving averages and opened another buy USD/CAD signal after the 50 SMA held yesterday.

Canada Consumer Price Index Report

• July CPI 3.3% YoY versus 3.0% expected
• June CPI YoY was 2.8%
• CPI MoM 0.6% vs 0.3% estimate
• Prior CPI MoM was 0.1%
• CPI YoY 3.3% vs 3.0% expected
• Gasoline prices fell -12.9% year on year versus -21.6 last month.

Core measures

• BOC Core YoY 3.2% versus 3.2% last month
• BOC Core MoM 0.5% vs. -0.1% last month
• Median 3.7% versus 3.9% last month
• Trim 3.6% vs 3.7% last month
• Common 4.8% vs 5.1% last month

Highlights of the report:

• Consumer Price Index (CPI) for July Rose 3.3% year over year, up from 2.8% in June.

• Increase mainly due to base-year effect in gasoline prices.
• Excluding gasoline, CPI rose 4.1% (from 4.0% in June).

• Electricity Prices in Alberta

  • Increased by 127.8% year over year in July.
  • Excluding energy, CPI slowed to 4.2% from 4.4% in June.

• Mortgage Interest Cost Index

  • Increased by 30.6% year over year.
  • Largest contributor to headline inflation.
  • All-items excluding mortgage interest cost index rose 2.4% in July.

• Monthly CPI Movement

  • Increased by 0.6% in July, up from 0.1% in June.
  • Mainly due to higher prices for travel tours in peak travel month.
  • Seasonally adjusted monthly CPI rose 0.5%.

• Energy Products

  • Year over year decline in energy prices was smaller in July (-8.2%) than in June (-14.6%).
  • Gasoline prices fell 12.9% year over year in July.
  • Electricity prices increased faster in July (+11.7%) than in June (+5.8%).
  • Natural gas prices fell 15.7% year over year in July.

• Travel-Related Services

  • Prices slowed or declined compared to July 2022.
  • Traveller accommodation prices increased 4.2% year over year.
  • Prices for travel tours declined by 1.2%.
  • Airfares decreased by 12.7% year over year.

• Grocery Prices

  • Grew at a slower pace, rising 8.5% in July (from 9.1% in June).
  • Fresh fruit prices rose 4.1% in July.
  • Bakery products increased by 9.8% year over year in July.

The inflation numbers were softer than anticipated, although USD/CAD slipped lower due to weakness in the USD after the US retail sales report. The price pierced below the 50 hourly moving average falling to 1.3447 although there was no close below it and the price bounced back up as the market digests the numbers from Canada.

The highest price reached just before the data release has extended upward, nearing the high price from the previous week, which stood at 1.35012 (the actual high price reached 1.34997). As the price declined following the data release, a pattern known as a “double top” is forming around the 1.35000 level. This suggests that the price has encountered resistance at this level twice, but that didn’t deter buyers.

USD/CAD Live Chart