Forex Analysis – Trade of the Day: AUD/CAD 22nd October 2014

Australia – Consumer Price Index

At GMT 12:30 a.m., the Australian Bureau of Statistics released the quarter-over-quarter consumer price index (CPI) figure that measures the changes in the price of goods and services bought by Australian consumers in the last quarter.

Since the consumer price index is primarily used by the Australian central bank to measure inflation, any significant change in the CPI often makes the Forex market extremely volatile. Also, as the inflation at the retail level has a big influence on the central bank’s future monetary policy, it is considered to be a leading indicator of the Australian economy.

During the second quarter of 2014, the Australian consumer price index increased by 0.5%, and the forecast for last quarter was set at 0.4%. However, the actual data indicated that the Australian CPI remained at 0.5%.

Canada – Core Retail Sales

At GMT 12:30 p.m., the Statistics Canada released the month-over-month core retail sales figure that measures the changes in the total value products and services in the retail segment. However, since the automobile prices tend to be volatile, the core retail sales figure excludes it and offers a better gauge of the retail sales.

The core retail sales data are considered by market participants as the primary gauge of consumer spending as it accounts the bulk of the overall economic activities in the country. Therefore, it is a vital leading indicator of the economy as well.

Last month, the Canadian core retail sales decreased by 0.1%, and this month the forecast is set at an increase of 0.1%. If the retail sales figure comes out anything below 0%, it would be interpreted as negative news for the Canadian Dollar.

Trade Recommendation for the AUD/CAD

Chart AUDCAD, D1, 2014.10.22 11:33 UTC

After breaking the formidable upward sloping trend line on August 8, the AUD/CAD also managed to break below the strong support level at 1.0110 on September 9. Since then, the pair has been on a free fall throughout September.

However, since the start of this month, the AUD/CAD has mostly traded with a sideways price action and stayed below the 0.9940 resistance level. On October 15 & 21, the price managed to penetrate above 0.9940 but in both occasions sellers prevailed and pushed the price downwards. Currently, the AUD/CAD is trading near the 38.2% retracement level around 0.9893.

If the AUD/CAD price manages to close below the 0.9825 level, it would encourage further short orders in the market, which may lead the price towards the last low at 0.9685. In that situation, it would suggest a PUT in the AUD/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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