Overview of the Canadian economy

Most recently, annual headline inflation in Canada decreased to 4.3% in March from 5.2% in February as reduced energy prices offset record-high borrowing costs. It was the weakest rate of inflation in 19 months, but it was still more than the Bank of Canada's target of 2%.

In line with expectations, the CPI grew 0.5% month over month. Year on year, gasoline prices declined for the second month in a row. Meanwhile, food prices rose at a high annualized rate of 9.7% in March, down from 10.6% in February.

While inflation appears to be dropping swiftly, the Bank of Canada believes that ongoing high demand and a tight labor market have put upward pressure on the costs of certain services. The Bank of Canada anticipates that headline inflation would gradually fall to around 3% by mid-2023 and 2% by the end of 2024. Meanwhile, the union that represents approximately 155,000 Canadian public employees has pushed the Canadian government to expedite a three-year wage hike of 22.5 percent for tax authorities and 13.5 percent for the Treasury.

According to the Canadian Mortgage and Housing Corporation (CMHC), home starts in March declined by 11% from 240,927 units in February to 213,865 units, a decrease of 237,800 was expected, due to the fast growing cost of borrowing, resulting in the trend slowing in previous months. It is expected to have an effect on the Canadian government's plans to solve housing shortages and the country's tremendous population growth.

Retail sales in Canada are predicted to fall 1.4% in March. This will be the greatest reduction in eight months, following a 0.2% drop in February due to lower sales at gas stations and gasoline dealers. This would imply that high interest rates may begin to impair consumer spending, prompting the Bank of Canada to postpone additional rate hikes.

The US dollar index was steady on Friday, but it is projected to rise for the first time in six weeks after a number of Fed officials stated that additional rate hikes should occur this year. This is consistent with the statements of the Philadelphia Fed President, who warned that US interest rates are likely to increase further and stay higher for longer, despite the fact that economic activity has slowed.

Meanwhile, the governor of the Bank of Canada stated last week that he is unconcerned about the impact of higher US interest rates on the Canadian dollar as the Fed continues to raise interest rates, which might lead to a weaker Canadian dollar and jeopardize the BoC's efforts to combat future high inflation. The governor has assured a Canadian Senate committee that it will only act if the Canadian dollar falls sharply. As a result, prior to the Fed's policy statement, the Canadian dollar pair tends to fluctuate and depreciate a bit more than the US dollar.

Data for Technical Analysis (5H) CFD USD/CAD

Resistance : 1.3546, 1.3549, 1.3555

Support : 1.3536, 1.3533, 1.3527              

5H Outlook

1H Outlook

Source: Investing.com                       

Buy/Long 1 If the support at the price range 1.3531 - 1.3536 is touched, but the support at 1.3536 cannot be broken, the TP may be set around 1.3548 and the SL around 1.3528, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1.3546 - 1.3551, TP may be set around 1.3558 and SL around 1.3533, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1.3546 - 1.3551 is touched, but the resistance 1.3546 cannot be broken, the TP may be set around 1.3534 and the SL around 1.3554, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1.3531 - 1.3536, TP may be set around 1.3525 and SL around 1.3549, or up to the risk appetite.       

Pivot Points Apr 24, 2023 02:30AM GMT

Sources: Investing 1, Investing 2