Trading Canadian Core Retail Sales 05/21/10…

We’re also getting the Core Retail Sales release from Canada today. With the Core CPI being released just about 90 minutes earlier, it’s important to consider the market context before planning for this trade.  If we are trading at a support level on a better-than-expected CPI release, it is possible that the market may not move much from this news even if our tradable deviation is hit… With that said, let’s look at the forecast for this news:

8:30 am NY Time Core Retail Sales    Forecast 0.5%    Previous -0.1%
ACTION: USD/CAD        BUY -0.1%         SELL 1.1%

We’ll be concentrating on the Core Retail Sales release and not the headline Retail Sales release;  Core Retail Sales release is a month-on-month release, and basically, it’s a measurement of the activities at the retail level of Canada, but excluding most volatile components, Automotive Components, which makes up about 25% of the Headline Retail Sales release, and it varies seasonally. A better release generally means more consumer spending, which leads to a better economy, thus, better for its currency.  And the CORE reading provides a far more accurate look at the economy.

I will look for a minimum deviation of 0.6% for this release.  Therefore if we get a 0.0% or worse, it would be negative for the CAD, and we’ll be looking to BUY USD/CAD; however, if the opposite is true, or a 1.3% of the actual release, I’ll be looking to SELL USD/CAD.

I should also mention that with USD trading at the highest levels against most major currencies, commodities have been under pressure and are adding to the weakness of CAD for the last couple of weeks… However, with BOC on the verge of hiking interest rates, the proximity of the Canadian economy to that of the U.S., and the relatively stable economy in Canada, we could see CAD diverge from other majors and hold its ground against USD and possibly strengthen if we were to get strong Retail Sales today…