The loonie has been making downward movements against the dollar for almost two months. The pair is now trading near the two-month low following weaker data and increasing concerns about NAFTA. The USD/CAD is now trading at 1.2713.
All this could change today when Statistics Canada releases the country’s inflation data. In theory, a rising inflation is bullish for the loonie as markets expect the BAC to start raising interest rates. Therefore, regardless of the data that is released today, there will be large movements in the pair.
Markets expect the country’s data to show that monthly CPI rose to 0.4% compared to last month’s -0.4%. They also expect that January’s CPI to grow by an annualized rate of 1.4%, which is lower from the previously reported data of 1.9%.
The first scenario is where the inflation may rise more than expected. This may bring the pair down to the support level of 1.2244. The opposite scenario is where the inflation falls or remains stagnant. This may push the pair above the 1.2910 level which forms an important resistance.