By TraderVox.com
The core CPI is different from CPI report since it excludes eight components such as energy and food prices. Currency traders track this index since it is used by the Bank of Canada when making decisions about interest rates. Any change that can be made on the interest rate affects the strength of the loonie in the market. Therefore, traders look at this report to get clues on the decisions that will be taken by the COB.
In June, Core CPI increased by 0.2 percent as the index continued on the positive territory since January. However, investors are forecasting a decline of 0.1 percent this time round as the index remains on the positive. This indicator will show that the Canadian economy continues to be strong despite the global economic slowdown as euro experiences major handles in dealing with debt crisis.
The economy’s strength has helped the loonie to remain strong as crude oil export prices remained stable and even moved higher during the week. The Canadian dollar is expected to close the week at new month’s high against the US dollar. As such, the outlook for the USD/CAD pair continues to be bearish as we go to the weekend. Some of the technical levels that are worth considering include. From top the 1.0245, 1.02, 1.0150, 1.0030, 1 and 0.9950 to the bottom.
The possible scenarios after the report is announced include the pair remaining within range are the Core CPI index remains within market expectation of -0.4 to 0.2 percent. However, if the index is above market expectation 0f 0.3 to 0.6 percent, this could push the pair below one support level; and if well above market expectation, the pair might break down two support levels.
On the other hand, if the index is below market expectation the pair might push upwards with a possibility of breaking one resistance level before the week closes. However, more resistance levels might be broken if the index is well below market expectation.
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