USD/CAD fell further on Tuesday thanks to broad US dollar declines, leaving the pair within a range of 1.1500 - 1.1800. FXCM SSI, a contrarian indicator, shows that traders remain net long the pair by 1.87:1, suggesting we could see additional declines in the near term. However, USD/CAD faces high event risk on Wednesday. According to the Bank of Canada’s last Monetary Policy Report in April, the Bank is open to quantitative easing (QE) and credit easing if nominal interest rates start to fall below zero. Indeed, the Bank stated that while they could cut rates to zero in theory, it would ultimately “eliminate the incentive for lenders and borrowers to transact in markets, especially in the repo market.” As a result, inflation reports will be key to gauging whether the Bank of Canada will go the route of QE, but looking ahead to upcoming reports, this shouldn’t be the case and thus, the news shouldn’t be too market-moving. Headline CPI is projected to have risen 0.2 percent in April, leading the annual rate to slump to 0.6 percent, the lowest since November 2001. Meanwhile, core CPI is forecasted to have risen 0.1 percent during the month, leaving the annual rate down at 1.8 percent from 2.0 percent. All told, the Canadian dollar may only respond if CPI rises more than expected (CAD bullish), or if CPI contracts on a monthly bases and drags the annual rates of price growth much low (CAD bearish).
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Related Articles:[/B] Canadian Dollar Weekly Trading Forecast, Australian Dollar Weekly Trading Forecast
[B]**For a full list of upcoming event risk and past releases, go to [/B][B]www.dailyfx.com/calendar[/B]
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Check out the Daily Fundamentals in its entirety for a look at what happened throughout the FX markets today.[/B]