USDCAD – Close Trade

Close Trade: 2009-08-21 16:00

Good afternoon! As I had hoped for, USDCAD rallied higher during today’s Asia trading session, and it was enough to trigger my short entry orders at 1.0930. The Loonie proceeded to rally against the Greenback during the European trading session, hitting lows around 1.0760 and my first profit target at 1.0830 along the way. With the weekend swiftly approaching, I have decided to close my trade to avoid weekend event risk.

Close remaining position at 1.0820

1st Half: +100 pips
2nd Half: +110 pips
Total: +1.05% gain

Next week, I plan on re-entering this trade as I feel the renewed rally in risk may continue to push Loonie to test previous lows around 1.0600. We’ll just have to wait and see, but for now it’s time to enjoy the weekend! :)

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Trade Idea: 2008-08-20 17:33

comdollsff

Good afternoon! There’s a chart pattern formation on USDCAD signaling a move lower may be in the works. Is it a false signal or is the pair ready to drop??

I have the four hour chart up and it looks like the pair has created a bearish flag pattern. This is a continuation pattern formed when we first see a strong downward trend, and then a pause that includes a channeling pattern higher during the consolidation. We just saw a break of the bottom rising trendline, indicating this pair may be ready to return to the downside move. If we do see a move lower, we could see the pair retest the 1.0600 area.

Fundamentally, we are still seeing economic weakness on both sides of the border, but the bonus for Canada is the demand for and price of oil. Canada’s strong oil exports gives their economy a boost as long as oil continues to rise in price and consumers use energy. Also, with the way the US government is spending more than they make and creating huge amounts of debt, there are the continuing concerns of the US Dollar remaining as the world reserve currency. So, the fundamental scales are in favor for a stronger Loonie vs. Greenback.

The last gigantic piece of the puzzle is whether or not the world has seen the bottom of the crisis and whether or not we are entering recovery mode. Personally, I don’t think so until we start seeing job losses stop and housing stabilize. Lately, we have seen a few pieces of positive economic reads here and there, and with the media continuing to focus on the positive rather than the negative underlying details, general investor sentiment has been bullish on risk. This accounts for the run up in equities, commodities, and carry trade currencies (non US Dollar and Japanese Yen) since March. As we all know, perception can be reality and as long as investors keep buying into the market on the idea that things are getting better, we can see money flow out of US assets and into higher-yielding assets regardless of the underlying fundamentals …..well, at least for a while. How long will that last? I don’t know, but for now I will go with the overall trend until the market tells me otherwise.

So, for now I will short if I see a pullback back up above 1.0900, my stop will be above the psychologically significant area at 1.1000, and target the previous lows just above 1.0600. Here’s what I am going to do:

Short USDCAD at 1.0930, stop at 1.1030, pt1 at 1.0830, pt2 at 1.0630

Remember to never risk more than 1% of an account on any single trade. Adjust position sizes accordingly.

No major event risks in the near future, so let’s see if volatility will take the market up to my entry orders. Stay tuned!

  • camelman

    Nice trade comdolls. I didn’t get in the trade because it was really quick in/out :) Thanks for your trades.

  • camelman

    Nice trade comdolls. I didn’t get in the trade because it was really quick in/out :) Thanks for your trades.

  • Kdog

    Can you let us know if your going to reenter next week and under what circumstances. I was thinking about shorting the pair but never had time maybe i can try next week. Thanks

  • Firstfx

    I had also seen this but I did not get in. Great call. Initial rally in US/CAD to about 1.9030 was due to the 12% reserve requirement by Chinese government and a flock to US dollar safety/risk aversion. It created pushed the US/CAD to 1.0930 but obviously it only had a temporary effect.

  • Firstfx

    Initial rally should be to 1.0930, I put 1.9030 by mistake. I guess one can not edit a comment.

  • Kdog

    Can you let us know if your going to reenter next week and under what circumstances. I was thinking about shorting the pair but never had time maybe i can try next week. Thanks

  • Firstfx

    I had also seen this but I did not get in. Great call. Initial rally in US/CAD to about 1.9030 was due to the 12% reserve requirement by Chinese government and a flock to US dollar safety/risk aversion. It created pushed the US/CAD to 1.0930 but obviously it only had a temporary effect.

  • Firstfx

    Initial rally should be to 1.0930, I put 1.9030 by mistake. I guess one can not edit a comment.