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What does the data mean to the market?

The Consumer Price Index (CPI) measures the price of goods and services from the consumer's perspective. It is a key way to measure changes in purchasing trends and inflation.

A higher than expected reading is positive/bullish for the CAD, while a lower than expected reading is negative/bearish.

Historic deviations and their outcome

August 18 2021 Today we saw a solid 0.3 positive deviation which gave a good 20 pip slow move before it retraced.

Check out the price action here:

July 28 2021 A minimal 0.1 deviation from forecast on the headline Core CPI M/M with a 0.3 conflict from the secondary line Core CPI Y/Y we saw a seven pip move inline with the headline before retracing and carrying on with the pre news trend. Not trade for me.

Check out the price action here:

June 16 2021 There was no deviation from the forecast on the headline Core CPI M/M. We saw a 0.4 from the secondary line Core CPI Y/Y; however, there was no impact on the price action.

Check out the price action here:

I will use forecasts of:

CPI (M/M) 0.1
CPI (Y/Y) 3.9
CPI Core - Common (Y/Y) 1.8
CPI Core - Median (Y/Y) 2.7
CPI Core - Trim (Y/Y) 3.1

Today's trade plan

Canadian CPI data is slowly moving more into focus I hope that now is the right time to see some nice moves when a reasonable deviation should occur.

Therefore today, I will need an unlikely 0.4 deviation from the forecast in either direction from the headline CPI M/M (month on month), including supporting deviations of 0.1 in the same direction as the headline from the other four lines of data that come out at the same time.

Without the comprehensive deviations on all lines, we may not find any continuation to bring us safety and profit.

**IMPORTANT** On this trade we hope and expect to see a slow move that happens over the first 25-45 seconds. When data hits, the market shouldn't move more than 5 pips giving you a chance to jump in. I would suggest that you would want to have your trade live within the first 5 seconds and ride the move for the next 20 seconds or so. Once you're a few pips in profit, set your stop loss to break even, to protect your equity. If things go to plan, then I would hope for around 20 pips on USDCAD in total before the move stalls.

Tradable pairs


Hope this helps but please do your own analysis!!

Good luck!!

James Thatcher

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Past performance is not indicative of future results. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.


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