We’re getting the Core Retail Sales release from Canada today, and it is a high impact release which may change the short term trend of the market for CAD. Let’s look at the forecast:
Core Retail Sales Forecast 0.1% Previous -0.1%
ACTION: USD/CAD BUY -0.5% SELL 0.7%
The Trade Plan
I’m going to be looking for a deviation of 0.6% for this news. Since the forecast is at +0.1%, if we get a -0.5% or worse, it would be negative for the CAD and we’ll be looking to BUY USD/CAD; however, if the opposite is true, or a 0.7% of actual release, I’ll be looking to SELL USD/CAD.
I’ll be looking to trade this release using my after-news retracement method. The idea is to wait for the release, wait for market to spike first, and then wait for a decent retracement before getting in.
The Market
Recent data out of Canada suggests that Inflationary pressure is easing, and with the rebound of USD in the past few weeks, commodity currencies including CAD are trading lower as market shift from risk appetite to risk aversion.
Looking ahead at this Retail Sales data, speculators will focus on this release in expectation of BOC’s (Bank of Canada) reaction. If we get a rather weak Retail Sales, there may be some possibility that BOC won’t hike rates in the coming September 8th meeting.
However, I do believe BOC will hike rates as most analysts agree, but the real focus will be on whether or not this rate hike is the end for this year or will BOC keep on hiking… Understanding that the market always look ahead, if BOC hikes rate as expected but announces a pause, expect to see weakness in the CAD… We’ll talk about this in more detail later.
Additional Thoughts
USD/CAD is the recommended pair, if we get a strong deviation, don’t expect much retracement as this pair should move steadily and gradually until after the European market close, which is around 11:30am EST.
If we get a good release, it is justifiable to jump in a trade even if the market didn’t retrace back within 20~30 pips of the pre-release level, because usually USD/CAD pair will spike, retrace about 20 pips from the spike high, and then retest the spike highs and make a breakout. Just be mindful of the 1.0680 Resistance area and as long as we are not close to it, USD/CAD should react according to our trade plan.
Pre-news Consideration
As the broader market awaits the next move out of BOC, the current level for CAD seems well anchored. I’d expect some volatility prior to the release, but I wouldn’t expect a strong sentiment driving this currency… However, with that being said, we are looking at a broader sentiment of risk aversion, which may go against commoditiy currencies, therefore I’d probably stay away from pre-news today.
Definition
Our focus is on the Core Retail Sales release and not the headline Retail Sales release; Retail Sales releases from Canada is a month on month release, and basically it’s a measurement of the activities at the retail level of Canada, and the Core release is the same Retail Sales but excluding most volatile components, Automotive Components, which makes up about 25% and it varies seasonly. A better release generally means more consumer spending, which leads to better economy, thus better for its currency. And the CORE reading provides a far more accurate look of the actual economy.
Related posts:
- US Core Retail Sales m/m 11/16/09
- US Core Retail Sales m/m 10/14/09
- Forex Trade Plan NZ Retail Sales 09/13/10
- Forex Trade Plan For NZ Retail Sales 08/12/10
- Forex Trade Plan For NZ Retail Sales m/m 07/13/10
- US Core Retail Sales m/m 12/11/09
- US Core Retail Sales m/m 09/15/09
- Forex Trade Plan For AU Retail Sales 08/30/10
- Forex Trade Plan For CA Core CPI m/m 08/20/10
- Trade Plan For UK Retail Sales 05/20/10
{ 3 comments… read them below or add one }
Not a good day. Neither of these trades panned out. Both met the deviation, spiked, retraced, but never came back–ultimately going well past the pre-release price. Very frustrating to say the least since these were large deviations.
Yes, market has moved excessively before coming into NY session. This is sometimes normal as USD/CAD already moved way too much due to risk aversion sentiment overnight.
OMG!!!!!!!!
Mentor, your target is hit -0.5% !!!
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Instant Execution? OR Pending order? How do I take my 50 pips?
I am confused demo-trading.
somebody help!!!!!!!!!
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I\’m crazy about you.
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