USD/CAD: Trading A Breakout – Closed Early

Trade Update: 2011-02-22 10:10

USD/CAD closed early

I decided to close this trade manually so I could cut my losses early. There were some technical signals confirming that I caught a bottom on this short USD/CAD trade, but the weak Canadian retail sales data was the final straw which pushed me to exit at market.

It’s so weird how December retail sales slipped by 0.2% when everyone’s supposed to be enjoying a holiday spending spree! Core retail sales also came in worse than expected, logging in a 0.6% increase instead of the projected 0.7% rise. On top of that, the previous month’s figure was revised downwards. I guess that just means Canadian GDP growth for the fourth quarter of the year would most likely disappoint as well.

Meanwhile, traders mostly ignored the 2.4% drop in the S&P home price index in the U.S., and focused instead on the three-year high CB consumer confidence figures. “Yipee!” for the U.S., “Boo!” for my trade.

So how could I have played this trade better?

I should’ve set my entry point a bit lower than .9820. As I mentioned, breakout trades aren’t exactly my strong suit but I decided to give this a try. Now I know better and I’ll probably stay away from these types of setups!

Still, I think I did a pretty okay job at staying on top of my fundamentals this time around, but I could’ve also done better at identifying a good entry point. I could’ve waited for the retest of the .9850 broken support level and shorted there. I would’ve wound up with a loss just the same, but it would’ve been much smaller.

Also, I should’ve taken a hint when my entry at .9820 formed a range with the previous .9850 support. It bounced along the range like it was dancing to Chris Brown’s Yeah 3X, before it was once again supported by the .9850 handle. It wouldn’t hurt if I also checked different time frames in my next few trades. Just like LoboTrader pointed out, there’s a bullish divergence in the weekly chart that could’ve helped me adjust my position.

Here’s how it turned out:
P/L: -50 pips / -0.5%

All right, on to my next trade! Anybody spot a good comdoll setup? Hit me up on the comments box below. I hope I have better luck on my next trades!

Trade Update: 2011-02-22 10:10

USD/CAD did break below .9850 as I predicted, but it looks like it’s now forming a new range. And, unfortunately, the bottom of the range is just where I got triggered! This is too bad for me because like Dev’s new single, I like my pips fast and my losses down low.

USD/CAD breakout

Anyway, the good thing is that the .9850 former support area seems to have turned into a resistance, and I’m hoping that the rise in crude oil prices can keep the Loonie strong. After all, conflict in the Middle East seems to be growing worse now that Libya is following Egypt’s footsteps. This has already driven oil prices to its two-year high and, if the unrest spreads to other oil-producing countries, prices could keep rising and so will the black crack-related Loonie.

In retrospect though, I probably should’ve been a little bit more patient and waited for the retest of the broken .9850 support. Another option would’ve been putting my entry order a bit lower than the significant .9820 figure. I could’ve watched the pair a bit longer, until I had more signals that the pair is heading south.

Oh well, since my trade idea was based on rising oil prices and broken .9850 support, I think I’ll hang on to this trade a bit longer until we get hold of more reports. I’ll be on my toes for the big retail sales report from Canada today, as well as the CB consumer confidence and existing home sales reports from the U.S. If data from both economies invalidate my trade idea, then I might consider taking out a part of my position, or closing my trade entirely. What do you think? Should I hang on to this trade?

Trade Idea: 2011-02-17 2:10

My last USD/CAD trade didn’t go as well as I expected it to, but I’m prepared to give this pair another chance this week. It looks like the recent dive has been a pretty strong one… I mean, did you see that almost vertical drop on the chart?! Boy, does this pair know how to drop it like it’s hot!

It seems that the pair is gearing up to make a break below the major support level at .9850. Although breakouts aren’t really my style, I’m gonna muster up enough courage to take this one. After all, the pair has been making lower highs and lower lows, which means Red Bull for the Loonie. Get it? RED candles on USD/CAD are BULLish for the Loonie?

Okay, that was a bit corny, but can you blame me? I’ve been hanging out with Big Pippin a lot lately!

Anyway, I took a quick glance at the economic schedule for the remaining days of the week and saw that both the U.S. and Canada have a bunch of red flags for today and tomorrow.

USD/CAD breakout

Today, Canada is set to release its wholesale sales report, which is often considered a preview of its retail sales data. If the actual figure doesn’t disappoint and posts a 1.3% increase as expected, it could give the Loonie more reason to carry on with its rally. Then the U.S. will release its CPI report and, if inflation is subdued as Big Ben says, the actual figures aren’t likely to beat expectations.

Anything weaker than the projected 0.1% uptick in core inflation and 0.3% increase in CPI could lead to more Greenback-selling. Later on, Bernanke could reiterate during his speech that inflation isn’t really a problem in the U.S. which means that the Fed wouldn’t be in a rush to hike rates.

Tomorrow, it’ll be Canada’s turn to release its inflation reports. Both the headline and the core figures are expected to post stronger readings than the ones we saw in December. January’s headline inflation is estimated to land at 0.3% while core inflation could print a 0.2% reading. But with oil prices on a roll in the past month, I have a hunch that the CPI reports could beat expectations.

In fact, oil prices are expected to keep rising in the near future. Ongoing tensions in the Middle East continue to provide support for crude oil, particularly when Israel’s foreign minister claimed that Iran was sending war ships to Syria through the Suez Canal. Although Egyptian authorities denied this claim, the tension among the oil-producing countries nearby was enough to spur panic-buying of oil.

If you’ve been paying attention in the School of Pipsology, you’d know that USD/CAD usually drops when oil prices rise. I know oil isn’t exactly a girl’s best friend but, when it comes to this trade, I’m rooting for oil!

Besides, who wouldn’t want to get in on the breakout scene on the daily chart? After popping up lower highs and testing the .9850 support many times, the pair looks like it’s about to disco towards south! To minimize my chances of catching a fakeout, I placed my short order below the previous low at .9820. Then, I put my stop loss at .9920, which is above the day’s high and is 100 pips above my entry. Lastly, even though I plan on trailing my stop, I placed my first PT at .9700 so I can hopefully gain more pips than my last USD/CAD trade.

So here’s what I plan to do :

Short USD/CAD at .9820, 100-pip trailing stop at .9920, pt1 at .9700

As I mentioned in my previous entry, I’ll be more conscious of the upcoming reports and changes in market sentiment that could affect my trade.

All right, that’s it for me today! I have to get ready for another girls’ movie night! Hmm, I wonder which one we should see first- Jennifer Aniston’s Just Go With It, or Channing Tatum’s The Eagle?

By the way, I just signed up for a brand-spankin’-new Twitter account so I can update my friends with my thoughts on my trades, comdolls, or even food! Feel free to follow me or add me up on MeetPips.com!

  • Pipster4lyphe

    Good call Happy!!! I hope things go your way this time…loving the descending channel on this trade!!!

  • camelman

    Why not wait for .99 (top of channel) then short? thanks

  • camelman

    Why not wait for .99 (top of channel) then short? thanks

  • happypip

    Hi Pipster4lyphe! Thanks for checking out my post! You’re right about the descending channel… Are you trading USD/CAD right now?

  • happypip

    Hey there camelman! I put up my entry below .9850 because I have a feeling that price will continue to fall once a couple of candles close below the major support. If I buy at .9900 there’s a good chance that .9850 held, which might boost the pair to parity.

    Hope this helps! :)

  • happypip

    Hi Pipster4lyphe! Thanks for checking out my post! You’re right about the descending channel… Are you trading USD/CAD right now?

  • happypip

    Hey there camelman! I put up my entry below .9850 because I have a feeling that price will continue to fall once a couple of candles close below the major support. If I buy at .9900 there’s a good chance that .9850 held, which might boost the pair to parity.

    Hope this helps! :)

  • LoboTrader

    Dear HappyPip: I see a Bullish Divergence in Weekly and even Monthly time frame chart, I think this entry is very risky, anyway i hope you enjoy the Movie. Regards.

  • LoboTrader

    Dear HappyPip: I see a Bullish Divergence in Weekly and even Monthly time frame chart, I think this entry is very risky, anyway i hope you enjoy the Movie. Regards.

  • Pipster4lyphe

    I saw the descending channel a cpl days aback…so when I saw your post, it prompted me to take a trade in this area as well..so let’s hope things work out for us!!

  • Pipster4lyphe

    I saw the descending channel a cpl days aback…so when I saw your post, it prompted me to take a trade in this area as well..so let’s hope things work out for us!!

  • happypip

    @LoboTrader: I see those potential divergences too, but since the oscillator still hasn’t crossed over or moved out of the oversold area, the pair might have room to drop further. I’m staying on my toes for this trade though and I’ll exit early if I see any additional bullish signals. Thanks for the heads up and for reading my blog!

    @Pipster4lyphe: Ooh, thanks for pointing that out! It looks like the descending channel is still holding for now. Good luck to us!

  • happypip

    @LoboTrader: I see those potential divergences too, but since the oscillator still hasn’t crossed over or moved out of the oversold area, the pair might have room to drop further. I’m staying on my toes for this trade though and I’ll exit early if I see any additional bullish signals. Thanks for the heads up and for reading my blog!

    @Pipster4lyphe: Ooh, thanks for pointing that out! It looks like the descending channel is still holding for now. Good luck to us!

  • Pipster4lyphe

    U got that right…it seems as if it has indeed find support @ our entry point…just hate it when the mkt trigger ur trade and start going the opposite direction…I’d say cut your losses short and think about another pair…that NZDUSD had a nice setup missed it bcuz didn’t want to have 2 positions opn at the same time. Look to another pair for the time being, one that has a clearer direction.

  • LarryLivingston

    This trade look so familiar. Seems like everytime the usd/cad gets below 1.0000 support is often strong. its like the usdcad bulls fight the hardest in this area….

    At least when you compare to AUDUSD.. it has been able to keep breaking new highs, while usdcad jumps around in a range… @#$%@#$^#%^

  • LarryLivingston

    This trade look so familiar. Seems like everytime the usd/cad gets below 1.0000 support is often strong. its like the usdcad bulls fight the hardest in this area….

    At least when you compare to AUDUSD.. it has been able to keep breaking new highs, while usdcad jumps around in a range… @#$%@#$^#%^

  • Pipster4lyphe

    U got that right…it seems as if it has indeed find support @ our entry point…just hate it when the mkt trigger ur trade and start going the opposite direction…I’d say cut your losses short and think about another pair…that NZDUSD had a nice setup missed it bcuz didn’t want to have 2 positions opn at the same time. Look to another pair for the time being, one that has a clearer direction.

  • LarryLivingston

    This trade look so familiar. Seems like everytime the usd/cad gets below 1.0000 support is often strong. its like the usdcad bulls fight the hardest in this area….

    At least when you compare to AUDUSD.. it has been able to keep breaking new highs, while usdcad jumps around in a range… @#$%@#$^#%^

  • LarryLivingston

    This trade look so familiar. Seems like everytime the usd/cad gets below 1.0000 support is often strong. its like the usdcad bulls fight the hardest in this area….

    At least when you compare to AUDUSD.. it has been able to keep breaking new highs, while usdcad jumps around in a range… @#$%@#$^#%^

  • happypip

    @Pipster4lyphe Yeah, you read my mind right there! I was waiting to jump in on that NZD/USD retracement around the .7650-.7680 area but I didn’t take that trade because I didn’t want to have two opposing trades open at the same time. I did cut my losses short on this USD/CAD trade after the Canadian retail sales were released, hopefully I find a nice entry point to join that NZD/USD drop so I can make up for my losses. But that descending channel on USD/CAD that you pointed out is still holding. I might wait for a better entry around .9950. Happy trading!

  • happypip

    @Pipster4lyphe Yeah, you read my mind right there! I was waiting to jump in on that NZD/USD retracement around the .7650-.7680 area but I didn’t take that trade because I didn’t want to have two opposing trades open at the same time. I did cut my losses short on this USD/CAD trade after the Canadian retail sales were released, hopefully I find a nice entry point to join that NZD/USD drop so I can make up for my losses. But that descending channel on USD/CAD that you pointed out is still holding. I might wait for a better entry around .9950. Happy trading!

  • happypip

    @LarryLivingston That’s true what you observed about USD/CAD and AUD/USD. The former tends to range for a while while the latter is great for catching trends. 1.0000 looks like it’d still hold for USD/CAD, might be great for a quick range trade.

  • foricks

    Hey, HP, if you’re looking for a trade, maybe you need to give CAD a rest and check out the AUD. It has just bottomed out of a nice Triangle formation on the 4hour and looks like it wants to head back up to ~1.0140 range. Going long at 1.0130, Stop around .9960, TP at 1.0140 (move stop to break even at 1.0075)

  • happypip

    @LarryLivingston That’s true what you observed about USD/CAD and AUD/USD. The former tends to range for a while while the latter is great for catching trends. 1.0000 looks like it’d still hold for USD/CAD, might be great for a quick range trade.

  • foricks

    Hey, HP, if you’re looking for a trade, maybe you need to give CAD a rest and check out the AUD. It has just bottomed out of a nice Triangle formation on the 4hour and looks like it wants to head back up to ~1.0140 range. Going long at 1.0130, Stop around .9960, TP at 1.0140 (move stop to break even at 1.0075)

  • Pipster4lyphe

    Or I was thinking NZDUSD…it seems as if it has found support @ 74260…not sure if it’s gonna retest that level…but between 7450-7400 should be good I suppose…a retracement to 7653 seems viable…price found support a tad bit below the 1.272 Fib Level…which seems like a very strong support Fib Level….Let me know what ya think!

  • happypip

    @foricks Seems like we’re looking at the same thing on AUD/USD! I did notice that symmetrical triangle formation on the 4-hour and daily chart but I still have a bearish fundamental bias for this pair because of all the risk aversion going on. Plus, I think I already missed the bounce from the bottom of the triangle so I’m thinking of going short. Watch out for my next trade idea!

  • happypip

    @Pipster4lyphe I’ve been waiting for that pair to retrace too! It seems I missed my entry area around .7680 (61.8%) Fib because it dropped after hitting .7650 (50% Fib), so I guess it’ll be part of my “Missed Setup for the Week” in my Comdoll Weekly Replay post later on. Of course I’m still crossing my fingers that it’ll retrace one more time so I can jump in on a short trade, knowing that traders are very bearish on NZD. It seems to be forming a descending channel on the 4-hour chart and, if it doesn’t retrace to the middle of the channel, it could make a break downwards. But, as I mentioned, breakouts aren’t really my cup of tea! Will you be trading this pair?

  • foricks

    OK, Between you and Big Pippin, I bugged out at the 62% Fib on the 4H chart for +40 pips and a good nights sleep. Between Oil, Gold, and China, there surely will be more pips in the morning.
    Thanks for the confirmation.
    Cheers

  • Pipster4lyphe

    Or I was thinking NZDUSD…it seems as if it has found support @ 74260…not sure if it’s gonna retest that level…but between 7450-7400 should be good I suppose…a retracement to 7653 seems viable…price found support a tad bit below the 1.272 Fib Level…which seems like a very strong support Fib Level….Let me know what ya think!

  • happypip

    @foricks Seems like we’re looking at the same thing on AUD/USD! I did notice that symmetrical triangle formation on the 4-hour and daily chart but I still have a bearish fundamental bias for this pair because of all the risk aversion going on. Plus, I think I already missed the bounce from the bottom of the triangle so I’m thinking of going short. Watch out for my next trade idea!

  • happypip

    @Pipster4lyphe I’ve been waiting for that pair to retrace too! It seems I missed my entry area around .7680 (61.8%) Fib because it dropped after hitting .7650 (50% Fib), so I guess it’ll be part of my “Missed Setup for the Week” in my Comdoll Weekly Replay post later on. Of course I’m still crossing my fingers that it’ll retrace one more time so I can jump in on a short trade, knowing that traders are very bearish on NZD. It seems to be forming a descending channel on the 4-hour chart and, if it doesn’t retrace to the middle of the channel, it could make a break downwards. But, as I mentioned, breakouts aren’t really my cup of tea! Will you be trading this pair?

  • foricks

    OK, Between you and Big Pippin, I bugged out at the 62% Fib on the 4H chart for +40 pips and a good nights sleep. Between Oil, Gold, and China, there surely will be more pips in the morning.
    Thanks for the confirmation.
    Cheers