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- Canada Consumer Price Index (CPI) to Hold at Annualized 1.0% for Second-Month.
- Core Inflation to Slip to 2.1%- Slowest Pace of Growth Since November 2014.
Trading the News: Canada Consumer Price Index (CPI)
Another contraction in Canada Retail Sales paired with a slowdown in the core Consumer Price Index (CPI) may trigger a near-term breakout in USD/CAD as it fuels speculation for another Bank of Canada (BOC) rate cut in 2015.
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What’s Expected:
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Why Is This Event Important:
Indeed, a slew of dismal developments may heighten the bearish sentiment surrounding the Canadian dollar and push BoC Governor Stephen Poloz to adopt a more dovish tone for monetary policy as the central bank increases its efforts to mitigate the risks surrounding real economy.
Expectations: Bearish Argument/Scenario
| Release | Expected | Actual |
| Wholesale Trade Sales (MoM) (JAN) | -0.8% | -3.1% |
| Manufacturing Sales (MoM) (JAN) | -1.2% | -1.7% |
| Retail Sales (MoM) (DEC) | -0.8% | -2.3% |
Canadian firms may continue to offer discounted prices amid the weakness in private-sector consumption, and a sharp slowdown in price growth may generate fresh monthly highs in USD/CAD as it puts increased pressure on the BoC to further reduce the benchmark interest rate.
Risk: Bullish Argument/Scenario
| Release | Expected | Actual |
| Net Change in Employment (FEB) | -5.0K | -1.0K |
| Gross Domestic Product (Annualized) (4Q) | 2.0% | 2.4% |
| Gross Domestic Product (YoY) (DEC) | 2.5% | 2.8% |
Nevertheless, the ongoing recovery in the labor market along with prospects for a stronger recovery may generate sticky price growth in Canada, and a batch of better-than-expected data may keep the dollar-loonie capped over the near-term especially as the Federal Reserve pushes out its interest rate forecast.
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How To Trade This Event Risk(Video)
Bearish CAD Trade: Core Inflation Slips to 2.1% or Lower While Consumption Contracts
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Need green, five-minute candle following a series of dismal data to consider long USD/CAD entry
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If the market reaction favors a bearish Canadian dollar trade, establish long with two position
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Set stop at the near-by swing low/reasonable distance from cost; use at least 1:1 risk-to-reward
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Move stop to entry on remaining position once initial target is hit, set reasonable limit
Bullish CAD Trade: Retail Sales, CPI Exceeds Market Expectations
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Need red, five-minute candle following the release to look at a short USD/CAD trade
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Carry out the same setup as the bearish loonie trade, just in the opposite direction