Cross-Eyeing: Long-term Resistance at 1.0500 on AUD/CAD – Trade Closed

Trade Closed: 2011-10-26 02:20

AUD/CAD Daily chart

The BOC decided to keep rates steady at 1.00% as they were still concerned about potential downside risks in the global recovery. Despite recent signs of life in the U.S. and Canada, BOC officials were worried about the U.S. economy and the potential for a double dip in Europe. As such, they downgraded their growth forecasts for the Canadian economy.

The dovish statement sank the Canadian dollar, which melted across the boards. As a result, my trade got blown out of the water. AUD/CAD blew right through resistance at 1.0500, rising as high as 1.0600 before the end of the day!

Stopped out at 1.0550: -50 pips / -1.00%

To be honest, I didn’t expect the BOC to be so dovish. I thought that my stop would be able to handle any volatility following such an event. Now that the long-term resistance is broken, could this pair be headed for new highs?

In any case, this was still a very good setup, and I would take it again if I see it form down the road. It’s a good thing that I ALWAYS practice good risk management techniques and keep my risk in check. Just gotta bounce back and find the next good setup!

On a side note, congratulations to Forex_Vendetta as he was able to catch that sharp Loonie selloff. Kudos, bud!

Trade Idea: 2011-10-25 01:20

AUD/CAD Daily chart

When I spotted this setup, I couldn’t believe my eye. After all, AUD/CAD hasn’t been in the area of 1.0500 since early in September 2011, and it hasn’t broken above this level since waaaay back in 1997! It’s a resistance level, fo’ sho’!

The question is, will it hold? I guess we’ll just have to wait and see! Anyway, I figured that this technical setup was too good to pass up so I decided to short at 1.0500 with a 50-pip stop.

Short AUD/CAD at 1.0500, stop loss at 1.0550, profit target to be determined.

To be fair, I think this trade also has a bit of fundamental backing behind it. I think there’s a lot of upside potential for the Canadian dollar today, especially since there are a couple of major events on tap in Canada. Canadian retail sales data is expected to show a healthy 0.4% increase in August following the sad 0.6% decline in July.

Also, the Bank of Canada is set to make its interest rate decision, and I think the central bank may be less dovish than most expect. After all, inflationary pressures picked up, 60,000 jobs were added to the labor market, and the manufacturing industry showed nice improvements since the last monetary policy meeting.

By no means is this trade a guaranteed win, but I think that it’s a high probability setup that presents a low-risk, high-reward opportunity. Then again, that’s what we’re after, right? There’s no such thing as a sure thing in trading. The best we can do is to take high probability setups when they come our way!

So who’s with me on this?

  • Edijs Bethers

    This one looks awesome. Nice 🙂

  • acid_rainbow

    Sorry it didn’t work out, the data came out all wrong for the CAD and it really blew up past 1.05, shame, I was looking for the same entry too!

    • cyclopip

      No worries, that’s just the way the cookie crumbles! It was a valid trade, and if not for the very dovish BOC statement, I think it would’ve turned out to be a winner. Thanks for dropping by, man! We’ll get ’em next time. 😉

  • adonis

    if that candle closes below that support, i may enter short

  • Beldean Ciprian

    I made the same system and got busted, however I managed to catch back the retracement and got my pips back 🙂

    • cyclopip

      Kudos, Beldean! That’s what I call making lemonade out of lemons! 😉