Canadian Core CPI Trading Plan 05/21/10

CPI or Consumer Price Index is direct measurement of inflation, which is a high impact release that could have long term effect on CAD and the market if we were to get a strong surprise release, here is the forecast:

7:00am (NY Time) CA Core CPI m/m   Forecast 0.2%   Previous -0.2%
ACTION: USD/CAD          BUY -0.1%       SELL 0.5%

We will be focusing on the Core CPI release today and our deviation for this release based on historical track record is 0.3%, therefore I’ll be looking for tradable figures of 0.5% or better to SELL USD/CAD or a -0.1% or worse to BUY USD/CAD. 

USD/CAD has been weakening on the back global concerns over sovereign default in the Euro Zone, which not only made USD stronger, but also added to the general decline of commodity prices.  With USD/CAD at the top of the range and BOC possibly hiking interest rate during the next meeting, we could see some demand for the CAD if we were to get strong release today.

DEFINITION:

“CPI, Consumer Price Index, is a statistical estimate of the movement of the prices of goods and services bought for consumption purposes by households. Its computation uses price data collected for a sample of goods and services from a sample of sales outlets in a sample of locations for a sample of times and estimates of the shares of the different expenditures in the total covered by the index which are usually based upon expenditure data obtained for sampled periods from a sample of households(wikipedia).”  It is also known as the “True Cost of Living”.

Our focus is on the Core CPI, or CPI ex Energy and Food components, which provides a better picture of inflation without the seasonal factor.

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Tagged as: CAD, Canada, Canadian Dollar, Consumer Price Index, Consumption, Core CPI, CPI, Cpi Index, Expenditures, Households, Inflation, Parity, Real Cost of Living