Trade Closed: 2013-01-24 8:05
Mother of curveballs! Instead of giving their usual optimistic remarks, the Bank of Canada (BOC) surprised the markets with a couple of bombshells.
First, the central bank downgraded its growth forecasts for Q4 2012, 2012, AND 2013! Apparently, the BOC folks are worried about business investment and exports levels. The slowdown in global growth isn’t helping them sleep tight at night either. Canada’s growth is now seen at 1.9% and not 2.2% in 2013 and 2% instead of 2.3% in 2013.
Because tons of forex geeks (including me) were expecting hawkish remarks, USD/CAD reacted strongly to the surprises. Heck, USD/CAD popped up all the way to parity minutes after the release! My tight stop at .9980 didn’t have a chance. Boo!
But ugh, it was a good setup at the time. Still, I probably could’ve avoided a loss if I had waited for the actual decision before I entered a trade instead of committing to a direction. I also could’ve limited my losses if I had been a bit faster in closing my trade.
How about you? Anybody here trade the BOC’s rate decision? I hope you had better luck than I did!
Trade Idea: 2013-01-23 3:23
I’m feeling a bit gutsy today so I’m planning on trading the upcoming BOC rate decision. Word through the forex grapevine is that the Canadian central bank is going to keep rates unchanged at 1.00% but with Carney still at the helm, I have a feeling that we’ll hear his usual hawkish remarks during the press conference.
Canadian data has been mixed lately though, with retail sales slightly better than expected and core retail sales below consensus. Their trade balance has also been worse than expected but the Canadian economy could still draw a lot of support from their strong hiring and manufacturing data.
The 4-hour time frame shows that the resistance at the .9950 minor psychological level is holding for now while Stochastic is pointing down, suggesting that Loonie bulls are ready to charge. I’ll be setting my stop above the top WATR that I mentioned in my Comdoll Trading Kit since that’s also above the falling trend line on the same time frame.
As for my target, I’ll be aiming for the recent lows at .9830, which is also the bottom of the pair’s current range. With that, I’ll end up having a tight 30-pip stop and a huge profit potential of 120 pips.
Here are the details:
Short USD/CAD at .9950, stop loss at .9980, profit target at .9830. I’ll be risking 0.5% of my account on this play and I’ll be moving my stop to entry once price reaches the .9900 major psychological support for a risk-free trade.
If you plan to join me on this one, make sure you read our risk disclosure!
Do you think this setup will work out? I’d love to have your feedback, as always!
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