[B][U]Trading the News: Canadian Retail Sales [/U][/B]
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[B][U]What’s Expected[/U][/B]
Time of release: [B]06/20/2008 12:30 GMT, 08:30 EST[/B]
Primary Pair Impact[B] : USDCAD[/B]
Expected: 0.6%
Previous: 0.1%
[B]How To Trade This Event Risk[/B]
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Retail sales in Canada are expected to grow 0.6% following a 0.1% improvement in March. The Canadian consumer has remained resilient due to a strong labor market which added another 8,400 jobs in May. Although, the level of job creation has slowed it is comparatively better than a U.S. economy that has lost jobs the last four months. The natural resource rich country has generated growth from the recent commodity boom and demand from emerging markets. The headwinds from the U.S. slowdown are expected to weigh on the economy, but exports to their neighbor to the south have increased the last five months. Also, foreign investors have shown their confidence in the world’s eight leading economy by increasing their investment in Canadian securities by twice as much as expected in April. The apparent stabilization of growth in the economy allowed the BoC to focus on inflation and leave their benchmark interest rate unchanged at 3.00% despite expectations of a 25 point rate cut. Indeed, inflation rose to 2.2% in May on the back of soaring gasoline prices. The core reading remained unchanged at 1.5%, which would have been the focus of the BoC in the past. However, following the last rate decision the central bank shifted the weight of importance to the headline number as they cited its expected rise above 3% -the upper band of their target range- for their neutral policy.
Canadian wholesale sales in Canada doubled in April from the month prior showing that retailers are growing more confident. This is typically an early indicator for retail sales. Additionally, the leading economic indicators improved to 0.2% from 0.1% as the new orders component improved by 1.2%. from 0.3% in April. Thus, we would look for a 1.0% increase in retail sales with supporting price action from oil to trigger a long trade(Short USD/CAD). We will look for a five-minute, red bar to confirm short entry on two lots of USDCAD. Our initial stop will be set at the nearby swing high (or reasonable distance) and our first profit target will equal this risk. The second objective will be based on discretion (taking mind to major support) ; but to preserve profit, we will move the stop on the second lot when the first half of the trade hits its target.
Alternatively, a return to negative sales would support the arguments that the U.S. headwinds are too strong for the economy to bear and increase the prospects that the BoC will resume their easing policy. We will use the same strategy for a long as we laid out for a short, just in reverse.
