Selling AUDCAD to 0.9100 on high inflation in Canada

Canada's key inflation figures for April will be released tomorrow Tuesday at 7:30 pm (GMT+3).

Inflationary pressure is expected to decrease across the whole group of indicators. Thus, the consumer price index (month-to-month) is expected to be 0.5% compared to 0.6% a month earlier.

The overall CPI (year-on-year) is forecast at 2.8%. The March value was 2.9%. The average CPI (year-to-year) is forecast at 2.7%, up from 2.8% in March.

The truncated CPI (year-to-year) is expected to be 2.9% compared to March's 2.9%.

If one looks at the results of the U.S. inflation report released last week, the actual estimates did not exceed forecast expectations, which indicates the effectiveness of measures to contain inflation over a long distance. And the spikes in CPI values shown in some reports during the last half of the year speak more about temporary fluctuations, inflation cannot be slowed down on a smooth downward path.

It is likely that Canada will have a similar situation as its North American neighbor. In this scenario, the Canadian dollar will gradually weaken against a basket of global currencies.

But in the event of the publication of data indicating the opposite, namely the continued strong inflationary pressures, the Canadian dollar is likely to strengthen strongly in the short term. The AUDCAD pair will be subject to weakening.

In particular, AUDCAD in this scenario, will break the support level of 1.9106 and rush to 1.0910.

The final recommendation is to sell AUDCAD provided that the actual values of the Canadian Consumer Price Indexes come out above the March values.

Profit should be taken at the level of 1.0910. A stop-loss could be set at the level of 1.0914.

The value of possible loss should not exceed 2% of your deposit funds.