USD/CAD Resistance at Parity? – Trade Closed

Trade Update: 2011-01-25 1:48

USD/CAD closed trade

The CPI report was a huge disappointment as it printed a 0.3% drop in price levels, worse than the 0.2% decline initially expected. This confirms that Canadian inflation is still weak, which most probably means that the BOC won’t be in a rush to hike rates any time soon. Nooooo…

Traders already started pricing in their expectations for this report as soon as the London session kicked off. Because of that, I had to let go of my recent profits as I awaited the CPI results. Even though I was up by more than a hundred pips lately, I was only able to lock in 25 pips since I closed manually at 1.0000. *sniff*

I probably should’ve waited until the initial reaction to the report died down before closing my trade. That way, I probably would’ve made 25 more pips if I closed a couple of hours later.

It looks like resistance at 1.0000 still held, but that was a tough call and I didn’t want to risk erasing all my profits completely. Besides, I stated clearly in my plan that I would close my trade if the actual CPI came in worse than expected.

Oh well, here’s how it turned out:

Profit/Loss: +25 pips / +0.25%

Again, not bad, but definitely could’ve gone better. I hope I lock in more pips with my next trades!

Trade Update: 2011-01-25 1:48

USD/CAD Daily Chart

A bit of risk appetite and anti-dollar sentiment in markets have been dragging the pair lower for the past few candles on the daily chart. I decided to tweak my plan a bit and put a 100-pip trailing stop on the trade as soon as the pair hit .9925, moving my stop to breakeven in effect.

Ack, I hope it’s the right thing to do! I’ve been struggling not to lock in at least a few pips on this trade, especially since Canada will be releasing its CPI numbers a few hours from now. My forex friends told me that the core inflation rate is expected to decline by 0.1% in December, but I’ll trade my freshly-baked croissants for a positive figure!

Aside from Canada’s CPI report, the big FOMC statement is also making me jumpy. They say that no big change is expected from the FOMC members, but surprises might be lurking around the corner.

Hmm, I think I’ll just watch these reports closely, and see if manually closing the trade becomes necessary. If the actual inflation figure comes in worse than expected, I plan to just lock in whatever profits I have and move on to a new trade idea for the week. Still, I hope that Canadian inflation beats expectations so that I could lock in half my winnings at .9850. Fingers crossed!

Trade Idea: 2011-01-20 23:01

USD/CAD Daily Chart

Down, dollar, down! Yesterday the currency bulls munched on the Greenback like it was buffalo chicken wings when the U.S. posted really good economic reports. Heck, it gained dramatically against almost all of its major counterparts!

But the Loonie isn’t without its redeeming factors! Like a triple chocolate pecan cookie that’s a bit burnt on the outside but is really soft and chewy on the inside, many traders passed up on Canada‘s better-than-expected economic reports.

Canada’s wholesale sales advanced by 1.2% in November, which is a much faster improvement from October’s 0.3% growth. Well, that sends happy thoughts for the upcoming retail sales release at 1:30 pm GMT today. I sure hope the actual report doesn’t disappoint.

Its leading index also flew by 0.5% in December, a bit higher than the expected 0.4% increase. Of course, we must not forget that the Bank of Canada recently raised its economic forecasts on the Canadian economy!

And don’t get me started on China’s economic growth! While markets were spooked by the possibility of the PBoC implementing more tightening policies in the near future, I still think that growth in China is good for the commodity-related Loonie.

From a technical standpoint, all the indicators seem to be lining up for another USD/CAD drop. As Big Pippin pointed out, the pair’s downtrend is still intact because the descending trend line on the daily chart is still holding. Can you imagine how giddy I got when I saw that shooting star form right on the 50% Fibonacci retracement level? That’s where I placed my short entry, whee!

Plus, it looks like the former support level at the 1.0000 handle would act as resistance now. But since this is a longer-term trade, I set a wider stop of 100 pips, which would be located just above the 61.8% Fib and the next major psychological level of 1.0100. I figured that the pair could go as low as the .9850 area so I’ll lock in half my profits there.

Oh, before I forget, I wanna give a quick shout-out to all those who gave their two cents and voted in my last entry‘s poll. You see, I was trying to figure out how I could best hold on to my profits and it seems like using a trailing stop was the popular bet. I’ll be trying that strategy out on this Loonie trade.

Here’s my recipe for success:

Shorted USD/CAD at 1.0025, stop loss at 1.0125, pt1 at .9850. I’ll close half my position at my first profit target and use a 100-pip trailing stop from there. As always, I’ll risk 1% of my account on this trade.

Thanks for checking out my blog! I’d appreciate your feedback and comments on MeetPips.com!

  • foricks

    Nicely played Doll!
    I was too busy waiting for a breakout of the upward channel on USDCAD to notice your post this morning. I finally read it 10 minutes before the retail news came out and jumped on board LOL. I like the fundamentals and technical analysis on this trade a lot. Thanks for the clarity of the setup.
    Cheers
    Frick

  • foricks

    Nicely played Doll!
    I was too busy waiting for a breakout of the upward channel on USDCAD to notice your post this morning. I finally read it 10 minutes before the retail news came out and jumped on board LOL. I like the fundamentals and technical analysis on this trade a lot. Thanks for the clarity of the setup.
    Cheers
    Frick

  • ForexLobo

    Dear HappyPip:

    Excellent Analysis, like always, but I have a respectful comment.

    Pt1 is very ambitious, why not search fewer pips, for example 100 (already they had been obtained) and then activate the trailing stop, if the trade fail, you are in BE.

    In this case, the Risk/Reward is only 1 to 1, but you have 100 pips in less time.

    Best Regards

  • ForexLobo

    Dear HappyPip:

    Excellent Analysis, like always, but I have a respectful comment.

    Pt1 is very ambitious, why not search fewer pips, for example 100 (already they had been obtained) and then activate the trailing stop, if the trade fail, you are in BE.

    In this case, the Risk/Reward is only 1 to 1, but you have 100 pips in less time.

    Best Regards

  • happypip

    Thanks for your feedback, foricks and ForexLobo! Good thing Canadian retail sales came out strong. Phew!

    I did think of going for just 100 pips on my first pt, which is much safer, but I decided to take the risk and aim for the recent lows. Don’t worry, I already started using the trailing stop the moment the pair dipped close to .9900 then I’ll close half my position if it falls 50 pips further.

    Wish me luck!

  • happypip

    Thanks for your feedback, foricks and ForexLobo! Good thing Canadian retail sales came out strong. Phew!

    I did think of going for just 100 pips on my first pt, which is much safer, but I decided to take the risk and aim for the recent lows. Don’t worry, I already started using the trailing stop the moment the pair dipped close to .9900 then I’ll close half my position if it falls 50 pips further.

    Wish me luck!

  • Firstfx

    Great call. But you left about 5 pips on the table…. just kidding. I was actually long prior to your call and closed out that position at the same number you went short. I am looking to go long again at much lower levels but oil is down and testing a resistance at about 87.50. Tomorrows CDN CPI is estimated to be -.2 – so it may be very possible to beat this negative number and help push the pair lower.

  • happypip

    Hey Firstfx! You had me feeling pretty bitter about that 5 pips I missed on my entry. Haha, I’m kidding too! Hopefully the Canadian CPI turns out positive so I can keep this short trade open. Best of luck on your future long trade though!

  • Firstfx

    Great call. But you left about 5 pips on the table…. just kidding. I was actually long prior to your call and closed out that position at the same number you went short. I am looking to go long again at much lower levels but oil is down and testing a resistance at about 87.50. Tomorrows CDN CPI is estimated to be -.2 – so it may be very possible to beat this negative number and help push the pair lower.

  • happypip

    Hey Firstfx! You had me feeling pretty bitter about that 5 pips I missed on my entry. Haha, I’m kidding too! Hopefully the Canadian CPI turns out positive so I can keep this short trade open. Best of luck on your future long trade though!

  • salt-n-pipper

    Don’t worry Happypip, you’ll get the next ones! Hey at least you still won, right? :)

    P.S. You rock :D

  • salt-n-pipper

    Don’t worry Happypip, you’ll get the next ones! Hey at least you still won, right? :)

    P.S. You rock :D