Forex Signal (Wed September 22 2010, 8:30am NY Time EDT) - CA Core Retail Sales...

Henry Liu

Former FPA Special Consultant
We’re getting the Core Retail Sales release from Canada today, and it is a high impact release which may change the short term trend of the market for CAD. Let’s look at the forecast:

Core Retail Sales Forecast 0.4% Previous -0.5%

The Trade Plan

I’m going to be looking for a deviation of 0.6% for this news. Since the forecast is at +0.4%, if we get a -0.2% 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 1.0% of actual release, I’ll be looking to SELL USD/CAD.

I'll be looking to trade this release using my after-news retracement method. The idea is to wait for the release, wait for market to spike first, and then wait for a decent retracement before getting in. For more details on my trading method:
Henry's News Trading Method.

The Market
Recent data out of Canada suggests that Inflationary pressure is easing, however with FOMC preparing the market for another round of asset purchases, we could see broad USD weakness making all commodity currencies stronger, including CAD.

Looking ahead at this Retail Sales data, speculators will focus on this release in expectation of BOC's (Bank of Canada) reaction. If we get a rather weak Retail Sales, there may be some possibility that BOC may pause its rate policy until next year, as recent CPI release slowed unexpectedly to 1.7% in August...

Additional Thoughts
USD/CAD is the recommended pair, if we get a strong deviation, don’t expect much retracement as this pair should move steadily and gradually until after the European market close, which is around 11:30am EST.

If we get a good release, it is justifiable to jump in a trade even if the market didn’t retrace back within 20~30 pips of the pre-release level, because usually USD/CAD pair will spike, retrace about 20 pips from the spike high, and then retest the spike highs and make a breakout. Just be mindful of the 1.0680 Resistance area and as long as we are not close to it, USD/CAD should react according to our trade plan.

Pre-news Consideration
USDCAD may be stalling at the current level, but judging the general market sentiment we may not see much movement prior to the release...

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

Historical Chart & Data Of CA Core Retail Sales


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Dollar weakness snookered me

Didn't work. dollar weakness may be too much to overcome. Got stopped out. Losing trade.


It went straight up 40 pips. How did you get stopped out?

Followed the trade plan. Went in after the retracement. had stop 30pips away, and after about an hour the PA dropped and I got stopped out. Perhaps stop was too tight. Anycase a losing trade for me.