Friday, July 22, 2011

Canada Core Retail Sales Data Release - 22 July 2011

Retail Sales is usually a very tradable release as traders draw direct correlation between retail activities with economic health. Here´s Forecast:

8:30am Core Retail Sales
Forecast 0.2% Previous 0.0%
ACTION: USD/CAD BUY -0.3% / SELL 0.7%

The Trade Plan

I´m going to be looking for a deviation around 0.5% for this news. Since the forecast is at 0.2%, a reading of -0.3% 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% (or better) of actual release, I´ll be looking to SELL USD/CAD.

Let´s trade this release using my after-news retracement method. The idea is to wait for the release, then for market to spike first, and then wait for a decent retracement before getting in. 


The Market

Depending on the Core CPI release about 90 minutes earlier, USDCAD may be driven already by speculation. The key is to gauge the context of the market before diving into a position.

With recent IVEY PMI showing a surprisingly disappointing number of 57.8 versus 65.6 of consensus expectation, while considering the fact that the Employment Change came out at 28.4K versus 15.0K of expectation, today’s Retail Sales figure may go either way… However, if it goes in the direction of CPI, then we can expect CAD’s momentum to pick up, perhaps even into the next week.

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.

Pre-news Consideration

There is no pre-news trade for this release...

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.


Thanks,