USDCAD: Going for the Neckline Retest – Trade Closed

Trade Closed: 2010-03-25 23:02

PoD Chart

Unfortunately, support at the neckline of the inverted head and shoulders formation and at the 38.2% Fib did not hold. The price punched through them with ease, triggering my stop loss soon afterward. Canada didn’t release any economic reports yesterday but the Loonie was still able to chalk up some profits against the greenback. As a result, 1% of my account got burnt. Ouch!

Stopped out at 1.0185 with a total loss of -51 pips / -1.00%

Trade Idea: 2010-03-24 23:13

PoD Chart

After zooming higher last night, the pair has retraced a bit and is now sitting just between the 38.2% and 50.0% Fibonacci retacement levels. It seems that the former neckline of the inverted head and shoulders pattern is holding as resistance turned support. Not to mention, in the past, the 1.0220 level has held as strong support before all that CAD buying that took place last week. If the area of interest holds as support, we could see buyers jump back in to take the pair higher for a small correction to end the week.

I’m going to go long at market at 1.0236. I’ve placed my stop past the 61.8% Fibonacci, at 1.0185. I’ve placed my take profit points at 1.0295 and 1.0360, which are just below longer term Fibonacci levels.

Some new fundamental developments gave me a reason to take a long USDCAD trade. For one, Portugal’s credit rating was downgraded by Fitch yesterday, which gave the US dollar to rally against other major currencies on account of risk aversion. Secondly and probably more importantly, Bank of Canada Governor Mark Carney said in a speech yesterday that the bank plans to keep rates low until mid 2010. He also added that he’s getting concerned with the continued appreciation of the Canadian dollar.

We may be in the middle of a sentiment shift, from buying the Canadian dollar to selling the currency. If the US jobless claims later comes in worse-than-expected later, we could see the USDCAD head higher.

In order to avoid event risk coming from the US summit, I will only keep this trade open during the European trading session. Besides, I’ve got some of my friends coming over to my place later tonight so I might have to close shop early. Oh, that reminds me, where did I put that recipe for their favorite shrimp salad…?

Anyway, here’s what I plan to do :

Long USDCAD at 1.0236. Stop loss at 1.0185, take profit at 1.0295 and 1.0360.

Thanks for checking my blog out. For more updates on my recent trades, follow me on MeetPips.com!

12 comments

  1. pipsprof.

    My lady,i think u are not giving enough breathing space for this volatile pair,the trade is a winner if enough leg room were available,Just my little comment,i hope u are not offended.

    Reply
  2. pipsprof.

    My lady,i think u are not giving enough breathing space for this volatile pair,the trade is a winner if enough leg room were available,Just my little comment,i hope u are not offended.

    Reply
  3. foricks

    Like Pipsprof, I felt your fundamental analysis was spot on. Hoodathunk 61% retracement… I took on the trade after your stopout for a 40+ pip gain (10am -2pm est) based on the fundamentals you defined as well as technicals. Keep up the good work and thank you.

    Reply
  4. foricks

    Like Pipsprof, I felt your fundamental analysis was spot on. Hoodathunk 61% retracement… I took on the trade after your stopout for a 40+ pip gain (10am -2pm est) based on the fundamentals you defined as well as technicals. Keep up the good work and thank you.

    Reply
  5. Happy Piphappypip

    Thanks fo ricks! Maybe my stop was a bit tight. I’ll remember to give my trades more breathing room next time!

    Reply
  6. Happy Piphappypip

    Thanks fo ricks! Maybe my stop was a bit tight. I’ll remember to give my trades more breathing room next time!

    Reply
  7. BlackStack

    Hmm, my candles look different than yours (I use eSignal). The green candle making the top looks like a fake out with a long wick, on my charts, and the first red candle after that is a spinning top. Not what I would have been looking for to go long.

    If going long why would you not wait until the pullback broke the previous high before going long? Though that turned around pretty quickly too in this case. I might have gone long at your price on the 26th with limited profit target. But looking at the weekly and monthly pivots would have given you clues that this up move was being rejected.

    Yes, a volatile pair. Daily charts are less volatile, but trade smaller lots.

    Reply
  8. BlackStack

    Hmm, my candles look different than yours (I use eSignal). The green candle making the top looks like a fake out with a long wick, on my charts, and the first red candle after that is a spinning top. Not what I would have been looking for to go long.

    If going long why would you not wait until the pullback broke the previous high before going long? Though that turned around pretty quickly too in this case. I might have gone long at your price on the 26th with limited profit target. But looking at the weekly and monthly pivots would have given you clues that this up move was being rejected.

    Yes, a volatile pair. Daily charts are less volatile, but trade smaller lots.

    Reply

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