On Wednesday, the Bank of Canada (BOC) left its benchmark interest rate steady at 1.25%, adopting a wait and see policy. The BOC said it did not know when they would hike rates to counter inflation. Today, Canadian CPI and Retail Sales data are released and may prove significant in determining the direction for the Canadian Dollar (CAD). The BOC has stated that they are happy for inflation to be close to 2%, and the expectation is for 1.5% year-on-year core CPI. A weak inflation reading could make a rate hike in May less likely and would be bearish for the CAD, whereas stronger than expected CPI data could trigger a bullish reaction. Traders should be aware that previous CPI reports have led to high volatility in CAD pairs.
On the 4-hourly chart, USDCAD is currently supported at 1.2660, which is the 23.6% Fibonacci retracement. Continuation of bullish momentum will find resistance at the 38.2% retracement level of 1.2750, followed by 1.2825. However, a bearish reversal will find immediate support at 1.2620, followed by 1.2550. A break of 1.2550 will see the pair resume the down trend towards 1.2450.
In the 4-hourly timeframe, GBPCAD has reversed from the August 2015 resistance trend line at 1.84. The pair is now testing the 23.6% retracement and horizontal support at 1.7815. A break of support at 1.7815 will open the way to further declines towards 1.7730 and then 1.7620. On the flip-side, if the support holds, a reversal to test resistance at 1.80 is possible.