Henry Liu
Former FPA Special Consultant
- Messages
- 473
CPI or Consumer Price Index is the direct measurement of inflation, and it is a high impact release that has long term effects on CAD. It is undoubtedly a high impact release that will be the focus of early NY trading session today. Here is the forecast:
CA Core CPI m/m Forecast 0.1% Previous -0.1%
ACTION: USD/CAD BUY -0.2% SELL 0.4%
The Trade Plan
We will be focusing on the Core CPI release today and our deviation for this release based on historical track record is 0.3%, therefore I’ll be looking for tradable figures of 0.4% or better to SELL USD/CAD or a -0.2% or worse to BUY USD/CAD.
I'll be looking for a after-news retracement trade for this release. I'll wait for the release, wait for the initial market move, and wait for a decent retracement before jumping in. For more information on my trading methods:
Henry's News Trading Method.
The Market
USD/CAD has been strengthening on the possible $40 Billion bid of Potash Corp. by BHP Billiton Ltd. and the fact that demands for CAD and canadian housing bond are on the rise as they provide safer alternatives to US Treasuries.
As a matter of fact, out of the C$170 Billion of Canadian securities sold since 2009, C$135 Billion were bought by foreign investors; combining this steady demand with recent BOC (Bank of Canada) shift in monetary policy, it is no surprise to see CAD remain in a tight range during both risk appetite and risk aversion driven market conditions.
Additional Thoughts
Today's Core CPI release is expected at a modest 0.1%, which is the median estimate of 19 economists surveyed by Bloomberg. Core CPI has been on a steady trend therefore I'd probably stay out of the market unless we get our tradable deviation.
USD/CAD is a very slow moving currency with very little retracement. We may need to jump in a little sooner, but market should spike in the direction of the news, stall, and then spike again. Usually the second spike will give us the most pips.
Pre-news Consideration
The headline CPI may come out much better than expected due to the HST, or Harmonized Sales Tax, as a resut of the merger of sales taxes in Ontario and British Columbia, which made some goods and services taxable for the first time... It is estimated that the effect HST should add 0.6% to the headline CPI in the next 12 months... We may see some buying of CAD (selling of USD/CAD pair) prior to the release.
DEFINITION:
“CPI, Consumer Price Index, is a statistical estimate of the movement of the prices of goods and services bought for consumption purposes by households. Its computation uses price data collected for a sample of goods and services from a sample of sales outlets in a sample of locations for a sample of times and estimates of the shares of the different expenditures in the total covered by the index which are usually based upon expenditure data obtained for sampled periods from a sample of households(wikipedia).” It is also known as the “True Cost of Living”.
Our focus is on the Core CPI, or CPI ex Energy and Food components, which provides a better picture of inflation without the seasonal factor.
Historical Chart & Data of CA Core CPI
Thanks,
CA Core CPI m/m Forecast 0.1% Previous -0.1%
ACTION: USD/CAD BUY -0.2% SELL 0.4%
The Trade Plan
We will be focusing on the Core CPI release today and our deviation for this release based on historical track record is 0.3%, therefore I’ll be looking for tradable figures of 0.4% or better to SELL USD/CAD or a -0.2% or worse to BUY USD/CAD.
I'll be looking for a after-news retracement trade for this release. I'll wait for the release, wait for the initial market move, and wait for a decent retracement before jumping in. For more information on my trading methods:
Henry's News Trading Method.
The Market
USD/CAD has been strengthening on the possible $40 Billion bid of Potash Corp. by BHP Billiton Ltd. and the fact that demands for CAD and canadian housing bond are on the rise as they provide safer alternatives to US Treasuries.
As a matter of fact, out of the C$170 Billion of Canadian securities sold since 2009, C$135 Billion were bought by foreign investors; combining this steady demand with recent BOC (Bank of Canada) shift in monetary policy, it is no surprise to see CAD remain in a tight range during both risk appetite and risk aversion driven market conditions.
Additional Thoughts
Today's Core CPI release is expected at a modest 0.1%, which is the median estimate of 19 economists surveyed by Bloomberg. Core CPI has been on a steady trend therefore I'd probably stay out of the market unless we get our tradable deviation.
USD/CAD is a very slow moving currency with very little retracement. We may need to jump in a little sooner, but market should spike in the direction of the news, stall, and then spike again. Usually the second spike will give us the most pips.
Pre-news Consideration
The headline CPI may come out much better than expected due to the HST, or Harmonized Sales Tax, as a resut of the merger of sales taxes in Ontario and British Columbia, which made some goods and services taxable for the first time... It is estimated that the effect HST should add 0.6% to the headline CPI in the next 12 months... We may see some buying of CAD (selling of USD/CAD pair) prior to the release.
DEFINITION:
“CPI, Consumer Price Index, is a statistical estimate of the movement of the prices of goods and services bought for consumption purposes by households. Its computation uses price data collected for a sample of goods and services from a sample of sales outlets in a sample of locations for a sample of times and estimates of the shares of the different expenditures in the total covered by the index which are usually based upon expenditure data obtained for sampled periods from a sample of households(wikipedia).” It is also known as the “True Cost of Living”.
Our focus is on the Core CPI, or CPI ex Energy and Food components, which provides a better picture of inflation without the seasonal factor.
Historical Chart & Data of CA Core CPI
Thanks,
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