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Uncle Sam will be printing CPI data in the New York session, and I’ve got this USD/CAD chart pattern on my radar.

Will downbeat inflation figures spur a break lower?

Before moving on, ICYMI, today’s Asia-London session watchlist looked at the descending triangle support on EUR/AUD ahead of inflation updates from Europe. Be sure to check that out if it’s still a valid play!

And don’t forget to check our newly released real-time Currency Strength Meter and Currency Volatility Meter!

Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Economic Calendar:

  • U.S. NFIB Small Business Index at 10:00 am GMT
  • U.S. headline and core CPI at 12:30 pm GMT
  • FOMC member Bostic’s speech at 4:00 pm GMT

What to Watch: USD/CAD

USD/CAD 1-hour Forex Chart
USD/CAD 1-hour Forex Chart

I’m seeing this head and shoulders pattern on the short-term chart of USD/CAD!

Does this mean that a reversal from the uptrend is in order?

It could all boil down to the upcoming U.S. CPI releases, as downbeat figures could dash hopes of the Fed tapering anytime soon.

Analysts are expecting to see the headline inflation figure to dip from 0.6% to 0.5% and the core reading to drop from 0.7% to 0.4%, reflecting weaker price pressures.

A break below the neckline support at the 1.2450 minor psychological mark could set off a drop that’s the same height as the chart formation, which is roughly 150 pips.

Technical indicators are painting a different picture, though, as the 100 SMA is above the 200 SMA and is increasing its lead to reflect strengthening bullish momentum.

Stochastic is indicating oversold conditions or that sellers need a break, possibly allowing buyers to take over.

In any case, make sure you account for the average USD/CAD volatility if you’re planning on trading this pair for the CPI release!