Hello Traders,
First week of the month and that means alot of news releases to trade. Let's get started with the first.
0830 CAD GDP m/m (0.3% expected, 0.2% prior, 0.2% to 0.4% range )
Affliated News Releases at 08:30 -
CAD Industrial Production (0.6% expected, 0.5% prior, -0.1 to 1.2% range)
CAD Raw Materials Price Index (4.0% expected, 3.5% prior, 3.0% to 7.0% range)
US PCE Core m/m (0.1% expected, 0.1% prior, 0.0% to 0.1% range)
UC PCE Core y/y (0.8% expected, 0.8% prior, 0.7% to 0.8% range)
US PCE Deflator y/y (1.3% expected, 1.0% prior, 1.0% to 1.5% range)
US Personal Income (0.4% expected, 0.3% prior, 0.2% to 0.8% range)
US Personal Spending (0.5% expected, 0.4% prior, 0.2% to 0.8% range)
- This report can move the Canadian Dollar quite well, however it is coming out with alot of other news which makes it a bit more risky. Without all the other news obscuring the picture, trading a 0.2 deviation can work well, as seen in November, a 40 pip move within the first few minutes after the release. However, this marked a top in the USDCAD and within 2 days the USDCAD was down over 200 pips back near parity. A Deviation of 0.3 therefore is a better option with the other news, which includes 2 other reports out of Canada besides the 5 from the USA, which of course will affect the USD side of USDCAD. Industrial Production data is important, we actually trade this indicator for other countries like the UK, so obviously it is best to see. Last month the Industrial Production and Raw Materials data was release from Canada on its own, and a +0.2 deviation on it, as well as a +1.5 on Raw Materials Price Index caused an 18 pip move over 5 minutes. A similar deviation caused a similar move in September. This gives some metric as to how to weigh in these 2 other Canadian Reports. A 0.3 deviation on GDP should move the market more than a similar deviation on Industrial Production which conflicts, but if there is a conflict, then exiting the trade should be possible without loss. As far as the news from the USA, the most important is the PCE Core, this is because it the Fed's perferred gauge of inflation, but basically it is best to look at all the data and assess if the picutre is positive or negative overall. This can provide the fundamentals to take a swing trade on a pullback based on the following method:
Generally Bad US Data but Good CAD data : short USDCAD
Generally Good US Data but Bad CAD data : long USDCAD
Generally Good US Data and Good CAD data : short EURCAD
Generally Bad US Data and Bad CAD data : long EURCAD
For Spike Trader use these triggers:
If it comes out at 0.6% or higher, USD/CAD should drop 30-40 pips.
If it comes out at 0.0% or lower, USD/CAD should rally 30-40 pips.
If it comes out at 0.6% or higher, 6C should rally 30-40 ticks.
If it comes out at 0.0% or lower, 6C should drop 30-40 ticks.
2330 AUD Interest Rate Decision (unanimous to hold rates steady at 4.75%)
This one is straightforward. Since there is no rate change expected from the RBA, simply if they do move rates trade accordingly. If they hike then buy Australian Dollars, if they cut then sell 'em. Ideal trade is a quick spike trade entry on a deviation, as the spike could reach near its full pippage in the 1st minute, like during the last unexpected hike back in November, extending 90 pips in the 1st minute. Price then just went sidewise, although nimble scalpers could probably cut some pips out of the chop.
Last week CPI & PPI came out lower, before that Employment Change was lower but so was the rate, also GDP at the end of November was lower. Add that to the Floods that have been happening in Austrailia and obstruction to the economy that has caused it is really unlikely anything will happen. RBA will give a statement, this could provide something to move the Aussie Dollar, if the statement is alot like last months it will not be talked about much, however with the Floods it is likely they will make some comments. The Flood has slowed the economy and probably will weaken the next GDP reading, however it has also caused higher food prices so this could increase CPI. So any hints to how the flood will affect the outlook for future rate hikes is what traders will be listening for.
Spike Traders:
If they hike rates, AUD/USD & 6A should rally 70-100 pips/ticks.
If they cut rates, AUD/USD & 6A should sell off 70-100 pips/ticks.
Afterpike Traders:
If the RBA statement stresses the weakening of GDP due to Floods, downplays Food Inflation, and push out expections of the next rate hike, AUD/USD could develop some downward pressure and move 20-40 pips
If the RBA statement doesn't seem too worried about the slowdown of the flood and asserts confidence of a quick move back to normalacy, mentions Inflationary aspects of Food Prices, and sound generally hawkish, AUD/USD could develop some upward pressure and move 20-40 pips.
The USD has sold off again on Monday reversing Friday's brisk and sudden flight-to-safety gains...Chinese PMI was poor again just a short while ago...also Chinese New Year is expected to bring another rate hike from the PBOC. These are other factors to take into context when assessing the RBA statement.
Happy Pipping,
Magister Pips
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