TheNews

Trading the News: Canada Retail Sales

A 0.6% rebound in Canada Retail Sales may spark a bullish reaction in the loonie and lead to a near-term pullback in USD/CAD should the data print highlight an improved outlook for growth and inflation.

What’s Expected:

Why Is This Event Important:

Even though the Bank of Canada (BoC) keeps the door open to further embark on its easing-cycle, a marked pickup in household spending may encourage Governor Stephen Poloz and Co. to retain the current policy at the last 2016-meeting on December 7 as ‘Canada’s economy is still expected to grow at a rate above potential starting in the second half of 2016, supported by accommodative monetary and financial conditions and federal fiscal measures.’ Nevertheless, another disappointing sales report may push the BoC to ‘actively’ discuss additional measures in 2017 as the region is expected to return to full-capacity ‘materially later than the Bank had anticipated in July.’

How To Trade This Event Risk
Bullish CAD Trade: Retail Spending Rebounds 0.6% or Greater

• Need to see red, five-minute candle following the release to consider a short trade on USD/CAD.
• If market reaction favors a long loonie trade, short USD/CAD with two separate position.
• Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
• Move stop to entry on remaining position once initial target is hit; set reasonable limit.

Bearish CAD Trade: Canada Household Spending Disappoints

• Need green, five-minute candle to favor a long USD/CAD trade.
• Implement same setup as the bullish Canadian dollar trade, just in reverse.

Potential Price Targets For The Release
USD/CAD Daily

• Failure to push above the former-support zone around 1.3630 (38.2% retracement) to 1.3660 (78.6% expansion) raises the risk for a near-term pullback, with the first downside target coming in around 1.3350 (78.6% retracement) followed by the Fibonacci overlap around 1.3290 (61.8% expansion) to 1.3310 (38.2% retracement).
• Interim Resistance: 1.3630 (38.2% retracement) to 1.3660 (78.6% expansion)
• Interim Support: 1.2980 (61.8% retracement) to 1.3030 (50% retracement)

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