Today’s Canadian CPI figures came out stronger than expected at 0.7% beating the 0.4% consensus. The Canadian dollar ended on a stronger note to which unfortunately I was essentially shorting.
I have not gotten into too many trades for the past week. I entered into a long position in USDCAD as it broke above a daily level, which I expected it to hold.
While its too early to tell, I do believe this level still remains strong. Friday’s sell-off closing lower is also contributed to a session factor. This is actually good news as it shows other traders have entered long and are only closing their position out for the weekend.
The US dollar is expected to remain bullish for the first half of 2018 and I expect traders to price in January’s Federal Open Market Committee’s meeting. During this FOMC session, the tone was set for a more hawkish stance with economic development forecasts adjusted upwards from December’s projections. The two percent inflation target is expected to be reached by mid-2018. February’s rally already indicates the bias favoring the US dollar after a rough start in January.
Quick update on NZDCAD, this pair has been in my spotlight lately and continues to be. I have set a limit order for the week ahead especially if it hits on market open. I believe the Canadian dollar’s reaction to the stronger than expected inflation to be short-lived. Let’s not forget that Canada lost 88,000 jobs last month so there will be much to make up for pushing the inflation higher. This pair currently makes for a great opportunity to be swing trading holding for a few days at most.