Close Open Orders: 2010-07-06 21:19

What a pity... My breakout trade idea was correct, but I the direction I chose was wrong! Instead of bursting upwards, USDCAD dropped like a rock and broke the rising trend line support. Boo!

Although the Canadian building permits came in worse-than-expected and was able to slightly provide support for the USDCAD, poor results on the ISM non-manufacturing purchasing managers' index pulled it right back down again! Time to close my open orders!

Trade Idea: 2010-07-06 00:01

The 1-hour chart of USDCAD shows that the pair is making higher lows but is unable to post higher highs. Called an ascending triangle, this formation indicates that sellers are weakening and buyers are starting to take control. Given these, I am hoping for a continuation of the existing uptrend.

I will place a buy stop order just above resistance at 1.0690, with a related stop order at 1.0620, just a couple of pips below the rising trend line and the Asian session lows. If price goes my way and hits 1.0750, I will take half my position off the table and put a 60-pip trailing stop on my remaining position.

I am basically trying to play the overall Loonie weakness. While other currencies have been posting gains over the dollar, the Loonie has actually been losing because of slipping oil prices. In fact, crude oil has fallen to its lowest in three weeks on the news that China's slow growth could constrain global demand for oil.

I'm also looking to the report on Canadian building permits as a possible catalyst for the breakout. It is expected to post a 2% decline in permits for May, opposite the 5.4% increase seen in April. The negative consensus could provide some buying support for USDCAD.

And finally, with traders heading back to their stations, we just might see volatility come rushing back in the FX market and cause some major breakout moves.

Again, here is my recipe for success:

Buy USDCAD at 1.0690, stop loss at 1.0620, pt1 at 1.0750, and put a 60-pip trialing stop if pt1 gets hit. I will risk 1% of my account.

Don't forget to follow me on MeetPips.com to see how well or badly I am doing! Let's see how my trade idea pans out. Wish me luck guys!