Forex Analysis – Trade of the Day: USD/CAD 20th August 2014

US Core Consumer Price Index

Yesterday, at 12:30 p.m., the US Bureau of Labor Statistics released the month-over-month Core Consumer Price Index (CPI) data. Since the Core CPI measures the changes in the price of goods and services but excludes the volatile food and energy prices, it is usually considered more important compared to the CPI figure.

Last month, based on the US Core CPI, there were around 0.1% inflation in the economy. This month, the forecast was set at 0.2%, but the actual news release proved that the US inflation level has remained same as July, 2014.

Although inflation is considered to be a negative thing for consumers, controlled inflation can actually help in growing the economy. The actual figure came in lower than expected, but it was still a positive number and it ensured that the Federal Reserve will continue with their current quantitative easing.

Canadian Wholesale Sales

Statistics Canada published the month over month Wholesale Sales data at GMT 12:30 p.m., which measures the changes in the total revenue of the wholesale industry. Since the Wholesale Sales figure is calculated from sales to retailers, it offers a clear picture about how the retailers are expecting their sales as well. Hence, the consumer spending projections can be forecasted based on the Wholesale Sales data.

Last month, the Canadian Wholesale Sales data showed that it grew at a 2.3% rate and the forecast for this month was much lower, at 0.4%. Nevertheless, the actual data came out at 0.6%.

Although the actual Wholesale Sales figure came out better than expected, it was way lower compared to last month, indicating Canadian retailers are expecting a slowdown in their sales as they acquired less inventory from wholesalers.

Trade Recommendation for the USD/CAD

USD/CAD - forex analysis

 

The USD/CAD has been on an uptrend since the start of July 2014. It tested the upward sloping trend line on August 15, and hovered around the trend line for a few days. Yesterday, the positive US Core CPI and better than expected US Building Permits data (1.05m against 1.0m) released influenced investors to push the price much higher, away from the trend line.

However, the USD/CAD found strong resistance at the 1.0940 area. Today, the pair has managed to cross the resistance level, and yesterday’s high. If the uptrend prevails, the USD/CAD may find next resistance around 1.0990.

If the pair can manage to close above the 1.0990 level on the daily time frame, it would suggest a CALL in the USD/CAD.

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About our Forex Analyst:  Asif Imtiaz

Asif worked as a prop trader for almost a decade, and later he managed trading operations for one of the largest foreign exchange strategy developers in Europe. Currently, he works as a trading consultant to several brokers and writes on various tech and financial topics. You can reach him at contact@asifimtiaz.com

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Asif Imtiaz

Asif worked as a prop trader for almost a decade, and later he managed trading operations for one of the largest foreign exchange strategy developers in Europe. Currently, he works as a trading consultant to several brokers and writes on various tech and financial topics. You can reach him at contact@asifimtiaz.com

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