Attacking AUD/CAD at Parity – Profit Taken

Trade Closed: 2012-10-23 03:22

I just got more proof that the old adage is true… Patience really does pay! Check out how my AUD/CAD trade turned out:

AUD/CAD Daily Chart

Save for the initial scare that I got after AUD/CAD broke below 1.0000, this trade has been an absolute angel.

As I mentioned last week, the AUD has been on quite a tear, thanks in part to good employment data and upbeat Chinese reports. Meanwhile, the CAD has been taking a beating after the BOC signaled that it doesn’t plan to hike rates until economic conditions ripen.

No wonder AUD/CAD has been going nowhere but up over the past week! As for the results on my account, this is what happened:

Profit target hit at 1.0250: +250 pips / + 1.875%.

Boo yeah! My decision to go big (I risked 0.75%) paid off – it gave me my biggest win of the year yet!

Q4 2012, so far so good. Now, if I could only string together a few more wins… then I’d really have myself a merry holiday season!

I hope you guys were able to milk this baby too. Thanks for following, guys!

Trade Update: 2012-10-18 05:20

AUD/CAD Daily Chart

Thank God I stayed patient on this one! Thanks to an awesome run by the Aussie, I’m now up over 150 pips!

The Aussie bulls feasted on good employment figures late last week, as the Australian labor market added a decent 14,500 jobs to the economy, nearly triple the expected 5,100 increase.

Meanwhile, the Canadian dollar took some hits when Bank of Canada Governor Mark Carney hinted that the central bank may lower its growth forecasts and hold back on any rate hikes for the meantime. Word on the street is that with all the concern surrounding the global economy, now just ain’t the time to be raising the interest rate roof!

In turn, we’re seeing AUD/CAD surge up the charts this week, with the pair nearly testing the 1.0200 handle.

While I’m glad to finally see my trade in the black, I am a little bit cautious about that shooting star that’s formed on the daily chart. I’ve decided to move my stop to 1.0080, which means I’ve locked in at least 80 pips on this trade.

The reason why I’m not closing out my whole position just yet is because Stochastic is still climbing, which indicates that the bulls may still have some room for me to hit my ultimate profit target at 1.0250. If we do see Stochastic crossover back to the downside, then I’ll definitely consider exiting the trade.

For those of you who also took this setup, how do you plan on managing this trade?

Trade Update: 2012-10-09 05:35

AUD/CAD Daily Chart

The combination of better-than-expected Canadian employment change figures (52.1K vs 10K) and a risk rally in the aftermath of the NFP release boosted the Canadian dollar, allowing it to outpace other currencies. In turn, this sent AUD/CAD crashing lower, hitting my limit order at parity!

Now, I have to admit, I am a little concerned that we just got a solid bearish candle close below the 1.0000 mark, but I am willing to give this setup a little more time to develop.

For one, the pair bounced off the .9950 level, which was also a former resistance-turned-support level in the past.

Second, Stochastic is showing signs of crossing over, indicating that sellers are running out of steam.

I’m gonna give this trade until the end of the week before I decide whether to hold on or not. If we see price close back above parity, it may be a sign that the recent trend could be coming to an end and that the bulls are back in control. On the flip side, if price continues to consolidate below 1.0000, I may have to cut my trade early and take a hit.

How do you guys see this pair playing out for the rest of the week?

Trade Idea: 2012-10-03 01:40

AUD/CAD Daily Chart

Do me a favor, fellas, and open up the daily chart of AUD/CAD and scroll back to these dates:

  • August 8, 2011
  • September 22, 2011
  • October 4, 2011
  • May 15, 2012
  • May 23, 2012
  • May 31, 2012

Notice anything special? Yup, AUD/CAD tested parity on all of those dates… and failed to break below it each and every time!

It actually came close to doing so a few times, but Aussie buyers always managed to push the pair back up above 1.0000 before the day’s end. Since the market has such a strong tendency to turn around at this level, I set up this trade plan:

Buy AUD/CAD at 1.0000, stop loss at .9900, profit target at 1.0250.

I noticed that the pair hasn’t gone more than 90 pips below 1.0000 in over a year, so I think a 100-pip stop should suffice. As for my profit target, I’ve got my eye on previous resistance around 1.02500.

You can probably tell that this is a technical trade more than anything. With the RBA surprising the markets with a rate cut yesterday, momentum seems to favor Aussie sellers at the moment. Still, I can’t help but feel that selling pressure on AUD/CAD will die down in the coming days after the RBA’s decision gets fully priced in.

Besides, the reward-to-risk ratio on this bad boy is just too good to turn down. How can you not give this potential 2.5:1 trade a shot??

Since this is a long-term trade, I’m a bit more comfortable with risking more than my usual 0.50%. I’m going with 0.75% on this one because I think I’ll be locked in this trade for a while if my buy order manages to get triggered.

What do you guys think? Are you with me on this?

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  • disqus_vdM2zfM1i9

    i closed it at a profit of 160 pip

  • fxsniper

    we could revisit .9950

    • cyclopip

      It’s possible. I’m on the lookout for a solid close below 1.0000 as a sign that parity has finally been broken.

  • Guest

    I believe this trade opposes sentiment, too dangerous for me :S

  • RB

    Fantastic trade Cyclopip! And you got out right before the BoC non-dovish statements this morning! Well done Nostradamus lol

    • cyclopip

      Thanks RB! Sometimes I get a little lucky. Ha!

  • RB

    Asian slow downs and North American growth/recovery?… Not to mention BoC is the most likely major currency to increase interest rates, and that’s right after Aussie interest surprise.

    I don’t know. I’d much rather ride this train down to parity and then let her do her thing around parity.

    • cyclopip

      Those are some really good points! I’m actually counting on Aussie bearishness to help me get triggered

      Parity’s held pretty well in the past though, so this should be interesting. I think it’s a high probability trade with an excellent reward-to-risk ratio. If I get burned, at least my risk is controlled and I won’t lose too much!

      • RB

        Great call so far! I wish I said I joined yall at 1.000! That daily close below the 52 week low scared me off. bleh! Good luck, and what are you eyeing as a profit target? Potential resistance at 1.01 and 1.015?

        • cyclopip

          Thanks, bud! To be honest, I was sort of spooked by that too. It’s a good thing it managed to make its way back up above 1.0000! I plan on holding this trade for a while, I’m aiming for the recent high around 1.0250.

      • RB

        A little help from the news. Profit target triggered at 1.0000. Good luck everyone on your longs! I’m going to take the weekend to mull over whether to join yall :D

  • Reza Fahlevi

    I already bought it cuz my system gave my the signal, see yaa at profit, hopefuly ;)

    • cyclopip

      Good luck Reza!

  • Kazzie Pips

    Noticed your idea on this a bit late, but nevertheless still looks a good one cyclopip! I’ve had a bit of time to check it out for myself and have found a few things about it that still make it look a good trade, I think… on the daily I like that it seems to have tested the low of the hammer and is edging up past the low of it as I write, I picked an entry that I liked the look of, 1.0068 which is the high of the day so far and sits within the lower shadow of the hammer but looking back to April ’11 this seems to be a support/resistance level, also on the hourly it seems to be a minor support/resistance level since your call on this one, as it does on the shorter timeframes of 15min, 5min – notice on the 5min chart there seems to be a cup with handle pattern forming, my favoured entry point sits at the left lip of the cup, although it is looking like the left lip of the cup is higher than the right. I have made a mental note that “cups with a higher right lip outperform those with a higher left lip”, all said I think this is looking like a nice trade, thanks for the idea, looking forward to seeing how it plays out :-) still working out my stop and target, am fairly new at this…

    • cyclopip

      Good work, especially with the multiple time frame analysis! I’m still thinking about whether I should enter at market or not. Where did you end up entering?

  • Fitz

    Thanks also for the trade idea. Followed this to the letter, and has likewise become my biggest win so far this year.

    • cyclopip

      Congrats Fitz! Hopefully we both can catch a bigger one before the year’s up!