Canada may now be over the peak inflation hump. The Canadian Inflation Rate has dipped to 7.6% in July from 8.1% in June.
The main culprit for the fall in inflation is the decline in gas prices, which has helped negate food prices, which continue to rise (up by 10% from a year ago).
The Bank of Canada (BOC) is evaluating this latest inflation reading as it heads toward its next interest rate decision, less than 3 weeks away, on September 7. A date which every trader should be aware of head of time. If inflation in Canada has peaked and is in decline, questions arise concerning whether the BOC will let up on its aggressiveness to manufacture a softer landing for the economy. Although, it may be too soon to expect such a change in strategy from the BOC as inflation is still very far away from its mandated 2% target.
Looking at the USD/CAD pair on the 4-hour chart, the price has recently moved in between strong support and resistance zones. On chart, this is visualised by the Support Resistance Channels Indicator. Traders can use this indicator to find significant supply and demand zones and trade them accordingly.
The green support/ demand zone band with an upper boundary around 1.2940 has catapulted the USD/CAD into a precarious position. The position is precarious because the pair has already rejected at the resistance/ supply zone, with a scary level of stubbornness.
Key levels to the upside to watch include the boundaries of this supply zone at 1.2965 and 1.2984. The most immediate levels of support to watch and take note of any breakage are 1.29400 and then 1.2936.