Fib Setup Forming on USD/CAD? – Trade Closed

Trade Closed: 2011-06-29 9:10 ET

As expected, Canadian CPI took USD/CAD down to my entry levels, but unfortunately it took the market way beyond that as well! My trade was quickly invalidated as traders went loony for the Loonie on renewed speculation of rate hikes in Canada…doh!

PCDPOD20110628.review.png

It has been a “risk on” type of week so far as market players have been trading in Dollar assets for higher yielding plays ahead of the Greek austerity vote. This brought the USD/CAD down as I hoped for me to go long at better prices. Unfortunately, Loonie buying was pushed even further as Canadian prices comes in “way above expectations” less than a few hours ago. In what feels like a swift kick to the shin, my trade was closed at .9760 for a 1% loss.

Total: -49 pips/-1.0% loss

In hindsight, I should have probably been conservative with my entry given the importance of the Greek vote, but a better move probably would have been to recognize a general shift to a strong “risk on” sentiment during the morning European trading session today. Also, I wasn’t comfortable knowing that Canadian CPI was coming up, which I should have taking as a sign to close out the trade.

Overall, a good set up, but I should have been more flexible with the ever shifting developments of the major themes and upcoming data. As I’m sure we’ve all heard before, these are tough markets to trade and we really have to stay on our toes.

So, a small hit on this one but I live to trade another day–thank goodness for risk management! I will continue to watch how the freshly passed Greek austerity package will be played by traders. Stay tuned for new ideas on my Twitter and Facebookpage!

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Trade Idea: 2011-06-28 06:40 ET

I missed out on a sweet Fib setup on my last trade idea for Cable, so hopefully I don’t do the same thing on a potential Fib play on USD/CAD. Will I make the right adjustments to my entry this time?

PCDPOD20110628.png

First a look at the fundies. The driving market theme continues to be the Greek austerity package drama as it seems to affect risk sentiment with every turn of that story. Also, the risk of global growth slow down is on traders minds and Canada may not be exempt from such sentiment as we get to see the monthly GDP number this week. Expectations are for a weaker number than the previous read. We also have Canadian CPI tomorrow, but expectations are for no change from the previous read. If the CPI data comes in higher the expected, traders may take USD/CAD down to my preferred levels to go long.

The US is light on top tier data in this week’s forex calendar, but Chicago PMI, Univ. of Michigan Sentiment and ISM Manufacturing may bring on a round of volatility at the end of the week. The latter two are expected to come in better than the previous reads, which could give my long USD/CAD bias a boost if they come in as expected.

In the 60 minute chart above, it looks like the pair is currently in an uptrend, and using the Fibonacci tool, I have identified potential support levels to go long with the present trend higher. The best level to potentially see buyers hold and reverse is the 61% Fib level as it lines up with the bottom of the weekly range. Also, it’s just under the MaPs level of .9800, so there may be quite a collection of orders in that area.

But after having missed that awesome drop in my last trade idea, I have decided to scale into a long position at the 38% and 61% Fibonacci levels. My stop will be 1/4 weekly ATR from my average entry of .9807 and I will target the top of this week’s range at .9950. Here’s what I will do:

Long USD/CAD half position at .9832. Long USD/CAD half position at .9786. Stop at .9760. PT at .9950

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.

This trade structure gives me a potential 3:1 return-on-risk if both positions are triggered.

That’s it for now. Stay tuned for updates and adjustments by following me on Twitter and Facebook! Good luck everyone!

  • Maxiv

    ow dear…..

    • Maxiv

      looks like it bounced off the other res’