Canada retail sales expected to rise 0.7% in October
The Canadian dollar has been trending stronger over the past two days, fueled by expectations on higher oil prices and the US dollar which is starting to look weaker after a strong winning streak. With the divergence in the currencies, today's economic data focuses on retail sales figures from Canada which will be the main event risk in the short term and could potentially mark a pullback in the USDCAD’s decline.
Canadian retail sales figures will be the major highlight today in an otherwise quiet trading day.
Economists are expecting to see a strong rebound in Canada's retail sales for the month of October. Expectations are for a 0.7% increase on the headline and a 0.6% on the core retail sales.
On the daily chart, USDCAD closed with a shooting star pattern which was validated by a bearish close yesterday. The medium term trend on the daily chart remains bearish but there is a strong chance for a pullback to the upside.
The technical support at 1.3495 has been breached but this level is pending a retest to be challenged as resistance. This could potentially happen today as expectations are on the hawkish side. After Canadian retail sales remained flat a month ago, with core retail sales slipping 0.1% in September, the data for October forecasts a 0.6% and 0.7% on the headline and core retail sales.
How to trade binary
USDCAD is currently seen testing support at 1.3400, but look for price to hold up at this level. If this scenario plays out, look for USDCAD to close above 1.3420, which will signal a short term rally back to 1.3495. The consolidation is also unfolding into a triangle pattern which will signal a breakout in the near term.
Therefore, CALL options are ideal for USDCAD for an expiry time of 21:00 GMT. The CALL option trade will be invalidated if USDCAD closes below 1.3400 on an hourly chart and posts a new lower low. In this scenario, simply wait for USDCAD to retrace to 1.3495 and purchase PUT options for 21:00 GMT expiry.
Target price: 1.3420
Expiry: 21:00 GMT