The downtown of Toronto city. Image source: Peter Kolomatski © 123RF.com
Earlier today, Statistics Canada released the recorded Consumer Price Index Data for September. According to the findings of the report, headline inflation rose to 0.5 per cent, exceeding the initial market forecasts which expected an appreciation to 0.4 per cent.
The data illustrates a welcoming improvement of the Canadian inflation rate, which was recorded at 0.1 per cent a month prior. Even though the economy is now less threatened by a potential deflation, headline inflation is far from the desired 2.0 per cent target rate.
Canada Inflation Rate. Image source: TradingEconomics.com
Despite these welcoming news, the underlying scenario for eventual recovery, which was advanced by the Bank of Canada, remains subdued by the recent global developments.
The uptick of COVID-19 cases worldwide threatens the tentative global recovery, as more and more market experts weigh in on a likely second economic downturn by the end of the year.
Meanwhile, the Canadian dollar continued to strengthen against the greenback during today's trading session. As can be seen on the 4H chart below, the USDCAD is in the process of establishing a clearly discernible bearish 1-5 impulse wave pattern, as postulated by the Elliott Wave Theory.
The pattern itself is contained within the boundaries of a massive descending channel. Given the recent rebound from the channel's upper limit, which concluded the final retracement leg (3-4), the price action is now expected to finalise the pattern by developing the last impulse leg (4-5).
These expectations are substantiated by the consolidation of the price action just below the major support level at 1.31300, which has recently adopted the new role of a prominent resistance. There is a high probability that such consolidation represents an interim stage in establishing the broader downtrend.
Moreover, the fact that the MACD demonstrates an increasingly more pronounced bearish momentum is also confirming the primary expectations.
Thus, the price action is likely to fall towards the major support level at 1.30450 next, provided that there are no substantial changes in the underlying market sentiment in the next following days.
USDCAD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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