Trade Closed: 2009-04-20 16:13
Geez! Well risk aversion came back in a big way at the open of trading this week as the Greenback rallied against the Loonie over 200 pips in a single day of trading. A fall in equities is at the root of the change to risk aversion sentiment as many felt the rally was too fast and focus shifts back on the possibility of the horrendous earnings yet to be released.
This rally in USD/CAD brought the pair up to my entry levels at 1.2235, and unfortunately my stop out level at 1.2385 as well where my trade was closed at a loss. Boo!
Total: -150 pips/ -1.0% loss
So a hit to my account on this trade as I take the full 1% hit. Thinking back on my last trade, I’ve been way too early to act on my economic and sentiment analysis, or maybe the rest of the markets are too late on realizing what’s going on in the world? Regardless, in these choppy markets where sentiment and themes seem to shift on a dime, I think I have to adjust my strategy for more short term trades. Yup, that’s what I’ll do, so stay tuned as I continue to watch this pair and see how it reacts to that falling trendline.
Trade Idea: 2009-04-19 20:39
Good evening and welcome to another wonderful week of Forex trading! I’m currently looking at a simple technical setup on USD/CAD as the pair retraces from its downtrend. Let’s take a look at the chart!
I have the four hour chart up, and we can see the market has taken the pair lower from 1.3000 since the beginning of March. 1.2200 was a major “support-turned-resistance” area, and by using the Fibonacci tool we can pinpoint an area of possible resistance to return to the current downtrend. Also, stochastics are indicating overbought conditions and that the retracement may be running out of steam.
Fundamentally, economic conditions are still weak in both the US and Canada. One difference that may continue to affect the demand of either currency is that the US is currently in the process of “quantitative easing”, hurting the perceived long term value of the Greenback. But with conditions also deteriorating in Canada (business conditions deteriorate and unemployment rises), we may see the Bank of Canada lower interest rates this week from 0.50% and retail sales may fall. If so, the Canadian Dollar may take a short term hit, but I think as long as they stay away from quantitative easing the trend lower in USD/CAD may continue. We’ll just have to wait and hear the Bank of Canada’s statement on April 21. In the US, initial jobless claims and durable goods orders will be the potential market movers for the Greenback.
So, my swing trade for the week is based mostly on technicals, and I will wait for a bit further retracement into the Fibonacci area before jumping in short. Here’s what I’m going to do:
Short USD/CAD at 1.2235, stop at 1.2385, pt1 at 1.2085, pt2 at 1.1935
Remember to never risk more than 1% of your account on any single trade. Adjust position sizes accordingly.
Stay tuned and good trading all!