Time to Bank on Loonie Strength? – Trade Closed

Trade Idea: 2010-05-04 00:51

PoD Chart

Geez, yesterday wasn’t such a happy one for me since my short USDCAD got triggered then stopped out in just a few hours. Apparently, traders freaked out and sold off higher-yielding currencies when risk aversion came back to haunt the markets. In fact, the VIX or the “fear index” surged by almost 30% again as fears of a worldwide debt contagion resurfaced. It turns out the Greek debt drama – more like the euro zone debt drama! – could be far from over. As a result, the USDCAD broke above the falling trend line and zoomed all the way up to my stop at 1.0250.

Total P/L: -80 pips / -1.00%

Time for more comfort food, I suppose?

Trade Idea: 2010-05-04 00:51

PoD Chart

Even though I missed out on that USDCAD move last week, I’m still looking to jump back on the CAD bandwagon. I am fundamentally biased towards the CAD, because, well, they are just rocking right now! Recent statements by the BOC has sparked speculation in the currency markets that the bank may raise interest rates before the end of the 2nd quarter. This has prevented the USDCAD pair from making any strong rallies, despite the runs of risk appetite that we have seen in recent weeks.

Looking at my economic calendar, they key data that I’m going to be looking out for is housing and employment data from both the US and Canada. Canadian building permits are expected to have picked up by 0.4% in March, up from a 0.5% decline in February. Could this be a sign that the labor market is improving? If so, this could give even more reason for the BOC to hike rates.

Meanwhile, both the US NFP report and Canadian employment figures are due on Friday. The NFP report is expected to have more economic candy for the average Joe, as another 197,000 jobs are projected to have been added to the economy. This would mark the second consecutive month that a significant amount of jobs were added, which could boost risk appetite. Canada is also expected to have added jobs last month, with the projected figure at 20, 300.

On the technical side, noticed that the pair is making lower highs over the longer time frames, particularly the daily chart. I’m not going to jump the gun just yet though because I think I can get a better price if I wait until the pair hits a major resistance level. With that said, I’m going to pull the trigger once the pair hits 1.0170-1.0200 region, somewhere around the previous day’s high.

Now that my entry is all set, it’s time to set up my stop loss and profit target points. I’m going to place my stop at 1.0250, which is just a couple of pips above former highs and beyond the 1.0200 psychological handle. I will ultimately target parity, but I will be locking in some profits at 1.0100… just in case.

Short USDCAD at 1.0170, pt1 at 1.0100, pt2 at 1.0000, stop at 1.0250

Ok that’s it for me today. I’m headed over to get some desert, but since it’s summer, I need to get in shape! Time to diet! Yogurt, anyone? I actually like the green tea flavor… Hmmm green teaaaa…

Don’t forget to follow me on MeetPips.com!

14 comments

  1. pipsprof.

    Happypip, market sentiment is changing and also due for correction,also tight stop loss and commodities are all pulling back.Not yet time to sell this pair.Enjoy

    Reply
  2. pakiestra

    This chicken has already been fried I’m afraid.
    Sorry for post mortem :0( (when I was starting to write the post price was just coming to hit S/L)
    I agree with professor take on it. On the technical side the most worrying fact was not only that the point of entry was above resistance line but instead of stochastic would be worth looking at the nice MACD divergence (price was doing lower lows and indicator was doing higer lows).

    Reply
  3. pipsprof.

    Happypip, market sentiment is changing and also due for correction,also tight stop loss and commodities are all pulling back.Not yet time to sell this pair.Enjoy

    Reply
  4. pakiestra

    This chicken has already been fried I’m afraid.
    Sorry for post mortem :0( (when I was starting to write the post price was just coming to hit S/L)
    I agree with professor take on it. On the technical side the most worrying fact was not only that the point of entry was above resistance line but instead of stochastic would be worth looking at the nice MACD divergence (price was doing lower lows and indicator was doing higer lows).

    Reply
  5. Happy Piphappypip

    Oh dear, it looks like pipsprof was right about this one. It turns out the Greek debt problems were far from over, causing my trade to get clobbered. Hopefully I can bounce back soon! Thanks for the feedback everyone.

    Reply
  6. Happy Piphappypip

    Oh dear, it looks like pipsprof was right about this one. It turns out the Greek debt problems were far from over, causing my trade to get clobbered. Hopefully I can bounce back soon! Thanks for the feedback everyone.

    Reply

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