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Forex Signal (Tue July 20, 2010 9:00am EST NY Time) CA BOC Overnight Rate Decision

Discussion in 'Current Forex Trading Signals' started by Henry Liu, Jul 19, 2010.

  1. Henry Liu

    Henry Liu Former FPA Special Consultant

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    Bank of Canada (BOC) will once again meet for their Overnight Rate (Interest Rate) and the decision will be announced today at 9:00am sharp. Along with the rate decision, BOC Carney will also announce a Rate Statement to further explain today’s decision. Here’s what analysts are expecting:

    9:00am (NY Time) CA BOC Rate Forecast 0.75% Previous 0.50%
    ACTION: USD/CAD BUY USD/CAD 0.50% SELL USD/CAD 1.00%


    The Trade Plan
    BOC (Bank of Canada) will be hiking its Overnight Rate as an overwhelming majority of analysts agree that there is absolutely no doubt for the 25 basis points hike. If BOC hikes as expected, market would have priced it in at the time of the release, so it would be a "no trade". However, what we are looking for is a surprise in the market and that would come in one of two possibilities.

    1. BOC decides to hike more than 25 basis points, instead of the 0.75% forecast by analysts, BOC decides to move rates to 1.00%. This would cause immediate demand for the CAD, we'll SELL USD/CAD on a Spike Trade immediately.

    2. BOC decides to leave rates unchanged at the current level of 0.50%. This would cause immediate sell-off of the CAD, we'll BUY USD/CAD on a Spike Trade immediately.

    The Market
    USD/CAD lost significantly against USD last week as most commodity currencies consolidated. Economic growth in China seems to have cooled down a bit, which in turn drove down demands for commodities. USD surged against CAD on Friday after the disappointing consumer sentiment reading which drove investors to the safe haven status of US Dollar. USD/CAD remained in a tight range during today's market showing practically no directional bias ahead of rate decision.

    [​IMG]
    USD/CAD trading in a tight range 07-19-2010

    The technical levels that I'd be watching are 1.0580 (resistance) and 1.0500 (support). At breach of either one of these levels could mean shift in short-term sentiment for the USD/CAD pair. In my opinion we should see stronger CAD just before the rate decision tomorrow, as I am already shorting the USD/CAD from 1.0570 level looking to get out at 1.0500~1.0450 before the release.

    Additional Thoughts
    Last BOC rate hike Governor Carney gave a cautious statement saying that "any further reduction in monetary stimulus would have to be weighed carefully against domestic and global economic developments..." The part on global economic developments is particular unsettling, and if similar statement is issued, we could see some selling on the CAD (means USD/CAD may go up).

    On the other hand, Deputy Governor Lane stated that "Recovery in Canada moving faster than expected, yet uneven..." and "the extend and timing of any additional withdrawal of monetary stimulus would depend on how the outlook for economic activity and inflation evolves." These statements are obviously hawkish for the Canadian Dollar as we saw recent CA inflation readings are on a steady uptrend, plus last 3 consecutive months of better than expected employment data... If BOC were to release similar statements, expect to see stronger CAD immediately after the statements...

    Here are some more recent comments from BOC Carney to give you a preview of what is likely the case tomorrow:

    1. - (CA) BoC's Carney: Economy is at turning point within the cycle, uncertainty remains
    2. - Access to capital not a problem for Canada at this time as balance sheets are strong.
    3. - China move on Yuan currency was an important step, but is not a cure-all for the global economy.
    4. - BOC will adjust if the Canadian dollar starts to impact inflation

    For historical data and charts on BOC Rate Decisions:
    Historical Data & Charts - BOC

    For explanation on Spike Trading:
    Henry Liu's Trading System



    Thanks,

    [​IMG]


    BTW, does anyone use Twitter or Facebook here at FPA? If you like my analysis, help me by spreading the word. Share it on Facebook and Twitter... Thanks a million! -Henry
     
    #1 Henry Liu, Jul 19, 2010
    Lasted edited by : Sep 8, 2016
  2. euroforex

    euroforex Private

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    Tweet

    Henry - aren't you on Stocktwits? Great report - solid and focused.
     
  3. czaray

    czaray Private

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    Hi
    What source would you recommend for getting the fastest announcement of economic news events?
    I am currently using Forex Factory, but by the time the data is posted the market has moved quite a bit.
    Thanks
     
  4. Henry Liu

    Henry Liu Former FPA Special Consultant

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    You can try tradethenews.com or ransquawk.com, both provide comparable release time. Of course if you want to go with the more expensive option, Bloomberg and Reuters are also available.
     
  5. Henry Liu

    Henry Liu Former FPA Special Consultant

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    No not really. And thanks.
     
  6. zarni

    zarni Recruit

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    go get SNW from fasteconomicnews.com

    Apparently Henry has other interests to protect here .....
     
  7. Bob Goodwin

    Bob Goodwin Recruit

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    Secret News Weapon

    Has anyone any experience using SNW--good, bad, indifferent?
     
  8. I-ching

    I-ching Recruit

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    If you don't have a ton of money to get bloomberg you need a program like SNW and there are others as well. That is your only chance to catch the spike no website is going to give you the numbers in time period. These days you basically need the program to click you in mili secs. after the numbers are released.
     
  9. Henry Liu

    Henry Liu Former FPA Special Consultant

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    Hmm I don't know how you can assume my intentions by looking at my answers. SNW does not provide audio service, no commentaries, no analysis. It can't even be considered as a newswire. I would never recommend that for beginner traders. Traders who are experienced and know what to do with information from SNW are different stories.

    Compared to Bloomberg, Tradethenews, Reuters, and even Ransquawk, the ability to do your researches, previews on news releases, consensus ranges, and some dealer chatter information are just priceless... don't ever settle for something less, unless you know what to do with SNW and you have experience with it before...

    That being said, proper use of SNW may help you make money. But I will not recommend something that I am not currently using or have used before.


    Henry
     
  10. Ghazali

    Ghazali Private, 1st Class

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    Thanks

    Hi Henry,

    Thanks alot for your kind info on brokers. Really appreciate it. :)
     

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