Current trend

During the Asian session, the USD/CAD pair is declining uncertainly, testing 1.3260 for a breakdown. Market activity remains poor as market participants await the publication of key statistics.

On Wednesday, investors will pay attention to the June data on US consumer inflation, which may significantly affect the monetary policy of the US Federal Reserve. Current forecasts suggest a slowdown in inflation from 4.0% to 3.1% YoY and an acceleration from 0.1% to 0.3% MoM. The core value, excluding food prices and energy, may be adjusted from 5.3% to 5.0%. The pressure on the positions of the US currency is exerted by the controversial report on the labor market for June dated July 7, which reflected an increase in the nonfarm payrolls by 209.0K, the low of the past two and a half years, which reduced the experts’ expectations upon the further “hawkish” regulator’s rhetoric. However, during the July meeting, more than 90.0% of analysts still expect a 25 basis point hike in the interest rates.

The results of the Bank of Canada monetary policy meeting will be released tomorrow: analysts are confident that the cost of borrowing will increase by 25 basis points from 4.75% to 5.00% against peak inflation and correction in the labor market. Thus, the June report reflected an increase in employment from –17.3K to 59.9K but unemployment rose by 0.2% to 5.4%. Officials have previously stressed that the pace of annual wage increases, which have slowed from 5.13% to 4.2%, is inconsistent with a 2.0% inflation target without productivity gains.

Support and resistance

On the daily chart, Bollinger Bands are actively growing: the price range narrows, reflecting the ambiguous nature of trading in recent weeks. The MACD indicator reverses into a downward plane, forming a sell signal (the histogram tends to be below the signal line). Stochastic shows a more confident fall approaching its lows, signaling that the instrument may become oversold soon.

Resistance levels: 1.3300, 1.3350, 1.3400, 1.3450.

Support levels: 1.3250, 1.3200, 1.3150, 1.3100.

Trading tips

Short positions may be opened after a breakdown of 1.3250 with the target at 1.3150. Stop loss – 1.3300. Implementation period: 2–3 days.

Long positions may be opened after a rebound from 1.3250 and a breakout of 1.3300 with the target at 1.3400. Stop loss – 1.3250.