Canada manufacturing sales tipped to decline 0.2%, bullish for USDCAD
USDCAD has been rising steadily, pushing above March 2016 highs in the past few days. The gains come about as the US dollar continues to be supported by the Fed's rate hike prospects come December, which will see the fed funds rate rise by 25 basis points, bringing the US short term interest rates to 0.75%. The Canadian dollar’s weakness held up despite a strong increase in Crude oil prices this week. But with oil now showing signs of a temporary weakness, USDCAD could remain bullish in the short term.
Canada's manufacturing sales increased 0.9% in August 2016 to $51.1 billion.
The jump came on higher sales of food, primary metal and energy costs. Sales growth was higher in nearly 15 out of the 21 industries recorded. Manufacturing sales for August beat estimates of 0.3%, but moderation is expected for the numbers for September, due to be reported today.
Analysts at RBC expect to see a flat reading for September driven by weaker auto sales but offset by strong rebound in aerospace productions. Weaker than expected print (below -0.2%) could trigger further weakness in the Canadian dollar as a result.
The technical chart for USDCAD also points to a near term upside risk, however the medium term momentum is showing signs of slowing.
How to trade binary
The dollar closed 0.77% weaker against the Canadian dollar yesterday, pushing prices to a 3-day low at 1.3447. Despite the bearish close, the scope for another retest to the upside is very much a possibility.
Therefore, purchase CALL options in USDCAD near the strike price of 1.3435 for 21:00 GMT expiry time, as price will likely fall back to this level over the next few hours. Establishing support here ahead of the Canadian manufacturing sales report will see a near term move to the upside as USDCAD retests the upper resistance level of 1.3489 – 1.3515.
Target level: 1.3435
Expiry: 21:00 GMT