Forex Analysis – Trade of the Day: EUR/CAD 24th September 2014

Germany – Flash Manufacturing PMI

At GMT 7:30 a.m., the Markit released the German Flash Manufacturing PMI data, which measures the level of a diffusion index based on surveying around 500 purchasing managers in the country.

Analysts consider the Flash Manufacturing PMI figure to be a leading indicator of the German economic climate as purchasing managers usually has the insight regarding business conditions such as employment, production capacity and new bulk orders and inventory situation.

Last month, the German Flash Manufacturing PMI figure came out at 51.4 and the forecast for this month was set at 51.3. However, the actual figure came out way low compared to the market’s expectation, at 50.3.

Canada – Core Retail Sales

At GMT 12:30 p.m., the Statistics Canada published the Core Retail Sales figure of the country. This economic indicator measures the changes in the total value of sales in the Canadian retail sectors, but it does not calculate the changes in the automobile sales.

Although the automobile sales make up around 20% of all retail sales amounts in the country, the higher price volatility distorts the clear picture regarding retail sales. Hence, analysts consider the core retail sales to be a better figure to estimate the retail level economic activity in the country.

Last month, the Canadian Core Retail Sales increased by 1.5%, this indicated a strong rebound in the economy. However, this month, the forecast was set at near neutral, at negative 0.1%. However, the actual Core Retail Sales figure came out way below the market’s expectation, at -0.6%.

Trade Recommendation for the EUR/CAD

Chart EURCAD, D1, 2014.09.23 23:04 UTC
Since March 19, the EUR/CAD has been trending downwards. During the first week of August, the pair managed to break the trend line but failed to break above the resistance around the 1.4740 level.

This month, the EUR/CAD has tried to break below the strong psychological support level at 1.4000. However, in the last two tries, it failed to do so. After getting rejected from the 1.4000 support level on September 19; yesterday, the pair tested the resistance level at 1.4250, but so far it is ranging between these two important price levels.

Once the EUR/CAD price breaks above the 1.4250 level, it then needs to break the downward sloping trend line since March 2014 in order to move further up. It would be difficult as the Canadian Core Retail Sales came out worse than the estimated figure. On the other hand, lower than estimated German Flash Manufacturing PMI figure also made the market neutral about any major upside move. Under the circumstances, it appears that the EUR/CAD would be ranging for next few days.

However, if the pair manages to close above the resistance level at 1.4250 and subsequently breaks the trend line, it would indicate a potential CALL in the EUR/CAD. Till that happens, a PUT is suggested.

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About our Forex Analyst: Asif Imtiaz

Asif Imtiaz

Financial Analyst


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