I’ve got a feeling that risk-off vibes are about to return to the forex market since OPEC leaders just won’t agree on production cuts. That’s why I’m looking to hop in this USD/CAD uptrend.
I’ve been watching the long-term ascending trend line on the pair’s daily forex chart for quite some time now, patiently waiting for a chance to catch a nice pullback. Applying the Fibonacci tool on the latest swing low and high shows that price is currently bouncing off the 50% level (just after Iran said that an oil production freeze is “illogical”) but a larger correction might still be possible with today’s FOMC minutes release.
I didn’t want to leave it all up to chance, though, so I entered half my usual position at market (1.3875) and set another buy limit order at 1.3575 near the 61.8% Fib and trend line. I’m keeping a wide stop below the trend line for this one and I’ve got my sights set on the previous highs near 1.4700.
I’m thinking that the lack of agreement among oil-producing nations could keep crude oil prices weak, thereby dragging the positively-correlated Loonie lower and weighing on overall market sentiment. As Forex Gump mentioned in a recent article on crude oil, the price slump is starting to weigh on the banking sector of some economies, as a number of these are exposed to energy sector loans.
Meanwhile, the lack of hawkishness among Fed officials might still weaken dollar demand during the release of the FOMC minutes, but this may have already been priced in a long way back when policymakers gave their thoughts on growth and inflation. With that, the Greenback might be due for a bounce at some point, especially if global growth concerns remain in play.
Here’s my plan:
Long USD/CAD at market (1.3875) for 0.25% risk, stop loss at 1.3175, PT at 1.4675.
Long USD/CAD at 1.3575 for 0.25% risk, stop loss at 1.3175, PT at 1.4675.
I’m going for a 1.15:1 return-on-risk for my first position and a possible 2.75:1 return-on-risk for my second position if it gets triggered. Of course I’ll be ready to close early if signs of a deal emerge among OPEC and non-OPEC nations, but that’s looking like a long stretch for now.
What do you guys think of my trade idea? As usual, I’d love to get your feedback on my setups and don’t forget to check out our risk disclosure if you’re joining me on this setup.
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