Cross-Eyeing: Fib Play on EURCAD – Trade Closed

Trade Closed: 2010-09-17 22:25

PoD Chart

Bahhh. Looks like the euro was just too strong this week that even the Loonie couldn’t hold its own.

The culprits? All those “safe havens” suddenly weren’t so safe after all!

First, the EURUSD rose like Apple stock (Did you see that move yesterday? It’s now up 31% for the year!) as the dollar dropped on rumors that the Fed may just implement another round of quantitative easing later this year. Next, the Bank of Japan intervened, which obviously led to massive gains on EURJPY. Then finally, yesterday, EURCHF rose more than 100 pips on comments made by the SNB.

And while I’m at it, let me mention how the euro also took the pound to school, as UK retail sales data came in worse than expected.

Meanwhile, Canadian manufacturing sales came in much worse than expected, printing a 0.9% decline last month. In addition, oil was also relatively weak as compared to other commodities, which didn’t help the Loonie’s cause.

In hindsight, I definitely should have cut my losses earlier. After all, this was a cross-play and my trade was mostly based on fundamentals. But instead, I was stubborn and thought that the 61.8% Fib was holding. I should have just cut the trade early at around 1.3345, which now seems to be a major area of interest.

What was annoying about this trade was that I was already up a good 60 pips on the first entry. Lately, I’ve been spotting decent entries on my trades, only for me to crap out because I don’t adjust quickly enough. I think in this environment, I need to stay in tune with the markets and adjust quickly, like what I did with my previous trade.

1st position (entry at 1.3250) stopped out at 1.3400 – -150 pips / -.50%
2nd position (entry at 1.3320) stopped out at 1.3400 – – 80 pips / -.50%
Total – average loss of 115 pips / -1.0%

So a loss for me this week, but no biggie since I managed my risk. A trader must always take things in stride. At the very least, I learned that I need to adjust more quickly and because I’m trading cross pairs, I really need to have a firm grasp of current market sentiment.

Thanks for reading my blog! Don’t forget to hit me up at MeetPips.com!

Trade Idea: 2010-09-14 5:10

Thanks to the return of risk appetite over the last couple of trading days, the euro has popped up across the markets. Is it slowly making a comeback? If you ask me, heck no!

Recently, the German government just granted Hypo Real Estate 40 billion EUR earlier this week. Mmm, is that the debt crisis aroma I smell? I believe that when the doubts about Europe’s financial system spark up once again, we may just see the investors start dumping the euro like a hot potato!

Now, that doesn’t mean that investors won’t keep looking for better, higher yielding assets to park their funds in. It just means that they’ll be avoiding the euro if they can. Ha!

This brings me to the Loonie. Just last week, the Bank of Canada raised rates and gave less dovish comments regarding the state of the Canadian economy. With a relatively better performing economy behind to support it, we could see the Loonie stay ahead of the pack, at least in the short term.

So I mixed and matched and what did I come up with? What else but EURCAD!

I decided to bring up the 4-hour chart of EURCAD and I do like what I see!

PoD Chart

After hitting a new low at 1.3073 last week, the pair has now steadily bounced back up almost 170 pips. Still, all I see is another opportunity to short this sucker! I noticed that the pair seemed to be stalling, as a doji formed in the past hour. I popped up the Fibonacci tool and voila, wadya know? The pair is stalling at the 38.2% Fibonacci level, which also happens to lineup with a former support level! With stochastics showing overbought conditions, will sellers jump back in soon?

Still, given all the choppiness in the markets, I don’t think it’d be wise to jump in all at once. There are some high impact reports coming out this week that may spark some wild moves up and down the charts. I’ve decided to short half my position at market price of 1.3250, with another half order waiting at 1.3320. This lines up with both the 50.0% Fib level. It may also find resistance at the former rising trendline, which may now act as support. My take profit point will be just above the recent lows at 1.3080.

Looking at the economic calendar, I’m going to have adjust this trade throughout the week, as we’ve got CPI and trade balance data coming out from the euro zone. From Canada, all we’ve got is the manufacturing sales report, but given the better than expected results of last week’s Ivey PMI report, we may be in for a nice surprise come tomorrow.

Again, here’s my game plan:

Short half position at EURCAD at market price (1.3250), short another half position at 1.3320, stop loss at 1.3400, take profit at 1.3080.

Hopefully, I get lucky and those Fib levels hold as strongly as Rafa Nadal’s grip on Grand Slams! Did you guys just catch the recent US Open? Nadal is slowly overtaking Federer as the best tennis player alive!