Big week ahead, let's get started with monday's first release:
0830 CAD GDP m/m (0.3% expected, 0.4% prior, 0.0% to 0.9% range )
Affliated News Releases at 08:30 -
CAD GDP Annualized q/q (3.0% expected, 1.04% prior, 2.0% to 4.0% range )
CAD Current Account q/q (-9.7B expected, -17.54B prior, -12.0B to -7.4B range )
US PCE Core m/m (0.1% expected, 0.0% prior, 0.1% to 0.2% range)
UC PCE Core y/y (0.8% expected, 0.7% prior, 0.7% to 0.9% range)
US PCE Deflator y/y (1.3% expected, 1.2% prior, 1.3% to 1.4% range)
US Personal Income (0.4% expected, 0.4% prior, 0.1% to 1.7% range)
US Personal Spending (0.4% expected, 0.7% prior, 0.2% to 0.5% 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. 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:
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.
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19:30 AU Retail Sales m/m (0.3% expected, +0.2 prior, -1.0% to +1.1% range)
Affliated News Releases at 08:30 -
AUD Current Account (-7000 expected, -7830 prior, 2.0% to 4.0% range )
The past 2 releases of this data have occurred on a Sunday night, and there is not the same
amount of liquidity during this time, but finally again it is released during the main part
of the forex trading week. Last release on Feb 6th a -0.3 deviation caused a quick blip
down of about 20 pips, and then price recovered, and thus those that shorted off this would
have got trapped. December had a nice -1.5 deviation and caused an immediate 40 pip drop in
the 1st minute after the release, however despite this large deviation there was no
continuation. The -0.4 deviation in May 2010 caued a decent 40 pips spike over 3 minutes,
no afterspike but a nice longer term swing trade, taking a full hour to retrace to pre-release.
This one can be funny some times, like in March 1st 2010, where a +0.7 deviation caused a
very harsh whipsaw 20-30 pips down and up...then a -0.9 in Feb 2010 a sweet 50 pip spike with
61% pullback after 15 minutes for a good afterspike trade.
Aggressive traders could try +/-0.5, and this is what we have used in the past, but I think it
is better to be cautious and use +/-0.6 triggers. Traders who experience any slippage could
even go out to +/-0.7.
Be aware that sometimes Austrailian news gets delayed because of the way the numbers are
converted electronically, so if there is any strong movement before the number comes out then
do not take the trade. Also be aware that the Interest Rate Statement is due out later in the
session and price will be affected by this after the Retail Sales is out of the way.
If it comes out at 0.9% or higher, AUD/USD should rally 40+ pips.
If it comes out at -0.3% or lower, AUD/USD should drop 40+ pips.
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2230 AUD Interest Rate Decision (unanimous to hold rates steady at 4.75%)
All 27 economists estimate that the RBA will be on hold again this month. At the start of the
year Australia had flooding and then recently they had a cyclone which hit alot of crops and
slowed down mining in Queensland. These natural events have slowed down the Australian
economy a bit, but the economy has been doing well and rebounded quickly after the 2008 crash,
fueled by the commodities boom and strong demand from their Chinese neighbors, so it seems that
the economy can deal with these issue as just minor setbacks. Right now the RBA is not expect
to raise rates until the end of the 3rd quarter and Governor Stevenson has said he believes that
the Central Bank is ahead of the curve and this is the place to be. However inflation is still
a problem, despite the lower deviation on Jan 24th, the fact is that even 2nd round effects such
as higher wages has shown up. At this point the RBA is using the fact that consumers are
spending less and saving more, and the strength of the currency to tame inflation without hiking
more. This will hopefully give the economy some slack to recover from the weather.
As far as trading this, basically if they do hike then buy, if they do cut then sell. It would
be a big surprise so it would be a big move. However it is unlikely they will do do anything,
so it could come down to the RBA Statement and how dovish or hawkish it sounds. If the statement
focuses on inflation then this should send the AUDUSD higher, if it focuses on the slow down in
growth due to the floods and cyclone, then this should send the AUDUSD lower
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.
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