A recent EURCAD rally leaves a prime opportunity to play Canadian dollar strength, and risk-reward favors a short as an intraday trade. We will look to sell the currency pair on a continued failure at 1.3891, setting full profit targets at the pair’s recent range bottom of 1.3765.
[B]Trading Tip – A recent EURCAD rally leaves a prime opportunity to play Canadian dollar strength, and risk-reward favors a short as an intraday trade. We will look to sell the currency pair on a continued failure at 1.3891, setting full profit targets at the pair’s recent range bottom of 1.3765. Yet traders should be mindful of previous support near 1.3810. If the pair reaches 1.3810 and fails to break downward, stop losses may be set to break-even to avoid the risk of swift reversal in the EURCAD. [/B]
[B]Event Risk Euro Zone and Canada[/B]
[B]Euro Zone[/B] – Economic event risk out of the Euro Zone will be relatively limited in the coming days of trade. Trade balance figures for the month of August are expected to show that the surplus narrowed significantly, though the seasonally adjusted numbers are likely to be more optimistic. Nevertheless, if export growth proves to have weakened dramatically, concerns that the Euro’s appreciation will be to the detriment of the economy could lead the national currency to weaken. The next day, the German producer price index will likely reflect inflation at the factory gate given the rise in commodity prices.
[B]Canada[/B] – Canadian data over the course of the next week will likely be mixed. First, wholesale sales are anticipated to ease back, boding ill for retail sales figures on October 23rd. However, the correlation between the two releases diverged last month, so markets may not be as inclined to trade off of the wholesale report. International securities transactions for the month of August are estimated to have risen, but similar to the US TIC data, the Canadian report could reflect a net outflow of government securities. On October 19th, traders will be watching both the headline and core CPI measures, as the Bank of Canada recently noted downside inflation risks given the Canadian dollar’s rapid appreciation against the greenback. If price pressures prove to have risen dramatically, however, the news could send the currency rallying even further.
[B]Data for October 17 – October 23[/B] [B]Data for October 17 – October 23[/B] [B]Date[/B] [B]Euro Zone Economic Data[/B] [B]Date[/B] [B]Canadian Economic Data[/B] Oct 18 Euro-Zone Trade Balance (AUG) Oct 17 Wholesale Sales (AUG) Oct 19 German Producer Prices (SEP) Oct 18 Int’l Securities Transactions (AUG) Oct 19 Bank of Canada CPI Core (SEP) Oct 23 Retail Sales (AUG)