Top Forex Trade Setups, Jan 18 – Canadian CPI Shares the Stage

• The Loonie fell to its lowest levels in more than one week against the dollar.
• The dollar takes a breather after gaining half a percent during the previous two sessions against its rivals.
• The market awaits a few significant events like Retail Sales m/m from the UK and CPI m/m figures from Canada.
• How to trade the Canadian dollar on inflation rate.

Key Fundamentals Today

GBP – Retail Sales m/m
The Office for National Statistics is due to release the retail sales data at 9:30 (GMT). It’s the primary gauge of consumer spending, which accounts for the majority of overall economic activity. In November, the retail sales surprisingly jumped by 1.4% vs. the forecast of 0.3%.

Currently, economists are expecting a drop of -0.8% in retail sales. A negative number of sales indicate slower inflation and slacks in the economy. Therefore, the Sterling bulls can face challenges today.

CAD – CPI m/m
Canadian inflation is suffering despite the improved crude oil prices. In the month of November, the CPI figure came out at -0.4%, beating October’s gain of 0.3%. Today, economists are expecting another drop of 0.4% in the inflation rate for the year-end.

USD/CAD – Trading the Inflation Rate

The Loonie remains under the spotlight due to the upcoming inflation figures. One of the major reasons behind recent weakness in the Canadian dollar is the sharp sell-off in crude oil.

Secondly, the possible end to the US-China trade war is also weighing on the commodity currency. As we know, Canada’s current account is in deficit. They export many commodities including oil, so the continued trade war is supposed to benefit the economy as, in the absence of China, some business can shift to Canada.

The USD/CAD soared to $1.3300 level early this morning but it still remains in the oversold zone in the daily timeframe. This signifies that the pair still has strong chances of trading bullish and we should also be looking for buying positions.

At the moment, Loonie is facing a solid resistance at 23.6% retracement level of $1.3300 along with support at $1.3180. With the bullish breakout of $1.3300, we may see this pair going towards $1.3370 – the 38.2% Fibonacci retracement level.

Daily Technical Levels
Support   Resistance
1.3245      1.3316
1.3211       1.3353
1.314         1.3424
Key Trading Level: 1.3282

USD/CAD – Trade Plan

I’m looking to open a buy position above $1.3250 with a stop loss below $1.3220 and take profit of $1.3300 and $1.3344.

Stay tuned to FX Leaders for more updates!