Trade Closed: 2010-03-25 23:02
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
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 :