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Canada's next set of inflation data could prove a critical moment for the Canadian Dollar, say analysts at TD Securities.

In fact, the Canadian bank says a softer core CPI reading could prove a "game over" moment for the Canadian Dollar.

Canadian CPI is due for release on October 19.

"The CAD is the currency we are most closely watching in the G10 at this time, as it appears most vulnerable to the USD wrecking ball," says Mazen Issa, Senior FX Strategist at TD Securities.

He notes the Dollar has "already afflicted so many" other currencies this year, but it could be CAD that is next in line.

Issa says for USD/CAD, the next major target is 1.40.

"We would like to see more consolidation before re-engaging in topside," he says.

Any exceptional underperformance in USD/CAD could meanwhile boost other currencies against the Canadian Dollar, such as the Pound.

The Pound to Canadian Dollar exchange rate (GBP/CAD) has fallen 9.0% already in 2022, but has since stabilised and has staged a recovery from a low of 1.4064 to 1.55.

A key headwind for the Canadian Dollar going forward is the slowdown in the economy, which analysts say is more pronounced than the one seen in the U.S. economy.

Economists at CIBC say a growing number of sectors in the Canadian economy are slowing down and this should bring a more cautious approach from policymakers at the Bank of Canada.

Recent labour market data meanwhile highlighted that numerous sectors were seeing employment fall, while wage growth fell to 5.2% in September from 5.6% in August.

The labour market is straining to add additional jobs; "with both the 3m and 6m trend in negative territory, this report speaks to a slowing economy, and a harder landing is starting to look more likely in early 2023," says Andrew Kelvin, Chief Canada Strategist at TD Securities.

With the labour market cooling the pressure on the Bank of Canada to slow its rate hiking cycle grows, depriving the Canadian Dollar of support via the interest rate channel.

That is why the upcoming inflation print is so crucial to the outlook: if it too suggests the Bank of Canada must now step off 'the peddle', the Canadian Dollar could come under notable pressure.

"Should Canadian CPI later this month confirm another data point of moderation or at least stability in the core measures, it's likely game over for the CAD," says Issa.

Issa is looking for USD/CAD to push above 1.38, in the process re-opening a shot at 1.40.

"We think we will need a bit more time to get there but nonetheless, the destination remains up," says Issa.