Monday, August 24, 2009

USD/CAD Trading Canadian Retail Sales Report


The Canadian dollar may face increased selling pressure during the last full-week of August as economists forecast retail sales to fall 0.1% in June, and the data is likely to reinforce a weakening outlook for future policy as growth and inflation remains weak.

Trading the News: Canadian Retail Sales

What’s Expected

Time of release: 08/24/2009 12:30 GMT, 08:30 EST

Primary Pair Impact : USDCAD

Expected: -0.1%

Previous: 1.2%

Effect the Canadian Retail Sales had on USDCAD for the past 2 months

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May 2009 Canada Retail Sales

Household spending in Canada surged 1.2% in May, topping expectations for a 0.5% rise, and the data encourages an enhanced outlook for future growth as policymakers anticipate economic activity to improve throughout the second-half of the year. The breakdown of the report showed automotive sales jumped 2.4% from April, with gasoline receipts increasing 0.9%, while discretionary spending on food and beverages rise 0.7% from the previous month. Meanwhile, the Bank of Canada raised its growth forecast for the world’s eighth largest economy in July and projects GDP to contract at an annual pace of 2.3% this year amid an initial forecast for a 3.0% drop in April, and the improve outlook held by the central bank may continue to push the Canadian dollar higher over the near-term as investors anticipate the BoC to tighten policy over the next 12 months.

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April 2008 Canada Retail Sales

Retail sales in Canada unexpectedly fell 0.8%in April to mark the first decline in four months, and households may continue to scale back on consumption as they face a weakening labor market paired with fears of a protracted downturn. A deeper look at the report showed gasoline receipts tumbled 1.9% following the rise in crude prices, with discretionary spending on food and beverages slipping 1.0% from March, while demands for clothing slumped 0.6% during the month. The data encourages a weakening outlook for private-sector spending as the unemployment rate holds at an 11-year high of 8.4%, and growth prospects are likely to remain subdued throughout the second half of the year as firms continue to scale back on production and employment in an effort to weather the downturn in global trade. As a result, the Bank of Canada may continue to ease policy further in the coming months in order to steer the nation out of the recession.

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What To Look For Before The Release

Traders with access to market depth information via the FXCM Active Trader Platform may use it to gauge the potency of the economic data release as well as to shed some light on the market’s directional bias. Increasing volume ahead of the announcement will telegraph likely follow-through behind whatever move is to materialize, while an imbalance in available liquidity on the Bid versus the Offer side of the market will tell us the direction major institutions are likely favoring ahead of the announcement:

Bullish Scenario:


If we see substantially deeper available liquidity on the Bid side of the market, this tells us that major price providers in the market are looking to buy the CAD against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bullish bias on USDCAD ahead of the data release.

Bearish Scenario:

If we see substantially deeper available liquidity on the Offer side of the market, this tells us that major price providers in the market are looking to sell the CAD against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bearish bias on USDCAD ahead of the data release.

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Written by David Song, Currency Analyst

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