The week comes to an end light on economic news, at least from the USA and Europe. However, currencies, or some of them, should show some volatility. The Canadian Dollar, for example, could be in play, as domestic inflation is probably the single most important event on the calendar for today. The Consumer Price Index will be viewed by many as possible indicator of future action by the Bank of Canada with regard to interest rates. The forecast calls for a reading of 1.3%, but a variation should cause a spike of activity in the Loonie. In addition, Retail Sales from Canada are also scheduled at the same time, so traders will have a lot of data to digest, eventually affecting the CAD.
In early Thursday trading, commodity currencies responded sharply to Chinese manufacturing PMI. Markets were in for a surprise, as the reading of 48.3 was short of the forecast of 49.4, as well as the previous result of 49.5. This particular development worked in favor of my trade in the NZD-JPY, as it rapidly moved lower. In about an hour, the price dropped over 60 pips, but found support at the 84 handle. The lowest point was at 83.98, and the NZD-JPY started to recover immediately. Since that was most of my intended objective, I decided to cover at 84.06 for a gain of 52 pips.
While waiting for the Canadian fundamental data, I will look for some short-term trading opportunities. As on most Friday’s, volatility at the start of the London session should create trading opportunities, especially if prices form tight ranges in before. The currency pairs of interest are the EUR-USD, GBP-USD and the AUD-USD.
Mike K.