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REASONS WHY YOU SHOULD SELL CANADIAN DOLLAR THIS WEEK.

In this article, we will discuss On-going Risk events which could affect the market. And US GDP, US employment and the BoC’s latest updates.

Why Canadian dollar have a great selling opportunity this week?

Last week,market sticks around the concerns over Europe. Especially Italy and its new government plan to weigh on EUR sentiment. its like adding further fuel to the fire.
ongoing political concerns in Europe start to pressure the Eur.
Results in EURUSD fall to fresh lows.

ING expect EURUSD to remain under modest downside pressure this week. Although they believe that after a stream of bad EU News,clouds seem to be clearing. But here its a different story.

Although data confirms , US and Canada will be key for trading opportunities.

Important points to note this week are as follows:

Falling oil prices adding a extra opportunity on the Canadian dollar. positive Canadian data is unlikely to break the bearish bias.

US preliminary GDP for Q1. This will be key for rate hike expectation and assessing the strength of the us economy.

BoC monetary police decision this will be highly influential towards CAD’s fundamental outlook.

US employment.This is a volatile event but can provide some great trading opportunities.

NZD – RBNZ Financial Stability Report.

Can country Financial report affect market?- Yes.

RBNZ use to release their financial report twice a year. which help us to understand the financial crisis in new Zealand.
It includes, current prospective of inflammation and growth. it helps the market to re-assess its fundamental outlook for NZ.
Any changes in RBNZ’s current economy, could provide a trading opportunity.
More hawkish/bullish assessment of the economy would strengthen NZD. While more dovish view weaken the NZD.
According to the RBNZ’s latest monetary policy announcement, a future cut is like as a hike. So, their financial stability report could be important to the market expectations.

USD – ADP Non-Farm Employment

Automatic Data Processing, Inc., release their estimate for NFP two days before the official release. This often provides an indication for how the actual NFP release is likely to perform.

A positive report will often support USD as it suggests the bias to NFP on Friday is likely to the upside. Conversely, a miss will often see USD weaken into the official release.

Nevertheless, the market’s reaction to ADP Non-Farm Employment tends to be somewhat inconsistent. Therefore, we would advise caution and not trading a deviation in the data blindly.

The best way to trade this event is by confirming its importance with post-event research. Once it’s clear that any deviation is market moving, you can then plan your entry.

USD – Preliminary GDP

why GDP important for market?

Domestic products plays a major role in countries GDP. This is the primary measurement of economic growth and activity. Preliminary GDP is the second estimate for Q1. Means it can lead to a revision from the advanced estimate depending on extra data.
Market consensus the preliminary estimate to remain unreviced at 2.3%.
A significant upwards revision would likely support rate hike expectations. Strengthening USD and arguments for the Fed to hike four times this year.

A downward revision to GDP could weigh on USD and expectations for four hikes this year. Of course, if GDP remains unrevised, there will likely be no significant reaction.

CAD – BoC Monetary Policy Decision

For their May decision, the BoC is widely expected to leave rates unchanged. Although there are outside calls for a hike including from Standard Chartered.

CPI slowing to 2.2% Y/Y in April and no conclusion to NAFTA negotiations, a rate change seems unlikely at this point. Although the BoC do tend to catch markets off guard, according to ING.

If the BoC do catch markets off guard with a surprise hike, CAD will strengthen across the board. This will provide an excellent trading opportunity to buy CAD at market.

Of course, if they do remain on hold, we would expect no significant reaction to the policy decision. Instead, the focus will shift to the accompanying statement.

In the statement, the market will be looking as to how likely a July rate hike is. Current market pricing suggests the probability of a July hike stands at 60-65%.

A hawkish tone suggesting a July hike seems likely will be CAD positive. While a dovish tone which reduces expectations for a July hike will be CAD negative.

An unexpectedly hawkish release or statement is probably the only thing that could significantly break the bearish trend on CAD this week.

USD – US Employment Report

The US employment report consists of three major components. These are Non-Farm Employment Change (NFP), Average Hourly Earnings and the Unemployment Rate.

All three components have the potential to influence rate hike expectations. Therefore, this event is often highly volatile.

The market’s initial reaction typically results from NFP.  With USD strengthening on a positive deviation and weakening on a negative deviation.

Although the initial reaction will likely be from NFP, the more sustainable reaction will result from the Average Earnings numbers.

This is because the Fed’s primary concern is currently inflation. As Average Hourly Earnings has an underlying influence on inflation it’s key to future rate hikes.

A significant increase in Average Earnings could increase rate hike expectations. This would likely support USD and increase expectations for four hikes this year.

Finally, the market will turn its attention to the Unemployment Rate.

Another surprise drop to multi-year lows will be USD positive while a surprise increase will be USD negative.

Given the number of market-moving data points released at once, we would advise caution. This event tends to see prices whipsaw which catches many traders out.

The solution is only to enter once you’ve analysed all three components and are sure of the overall bias.

CONCLUSION

Its a clear and best opportunities for this week from Canadian and US data.

We expect CAD to be a great shorting opportunity throughout the week because of the drop in oil prices.

As such, if oil prices continue to fall, any positive CAD data will struggle to maintain its momentum. On the other hand, negative CAD data will only exacerbate the current bearish bias.

The goal of this article is to help you improve your understanding and ability to trade risk events.

If you would like to learn more about risk event trading,join with us.

Learn Forex fundamental news trading with www.forextamil.com

 

29 May 2018 4:48 pm Posted by tamilforex

 
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