USD/CAD – Trade Closed

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

comdollsff

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! :)

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  • moneeeb

    I will follow this order it seems very good one,, but i am afraid that we might not reach the 1.2235

    it seems very conservative, any ways i am in

  • chicagobuy

    I think we might easily reach 1.2235 or more actually 1.2350 if Bank of Canada cut interest rate on April 21st.

  • cadarkitek

    I like this pair short as well more so now that it has broken an up trend line on my chart but I’m looking for a larger retracement(61.8 from the last swing) before I enter.

  • moneeeb

    I will follow this order it seems very good one,, but i am afraid that we might not reach the 1.2235

    it seems very conservative, any ways i am in

  • chicagobuy

    I think we might easily reach 1.2235 or more actually 1.2350 if Bank of Canada cut interest rate on April 21st.

  • chady250

    I think I am gonna jump the gun a bit, Shorting at 1.2210

  • cadarkitek

    I like this pair short as well more so now that it has broken an up trend line on my chart but I’m looking for a larger retracement(61.8 from the last swing) before I enter.

  • chady250

    I think I am gonna jump the gun a bit, Shorting at 1.2210

  • fed

    I will wait untill the price hits the trendline, it will be just above .786 line. I will see what happens then.

  • LoboTrader

    I’m short 1.2368 Good Luck to all

  • fed

    I will wait untill the price hits the trendline, it will be just above .786 line. I will see what happens then.

  • pipnigma

    Hi happy pip. any thoughts on BOC announcing their own version of QE perhaps following the footsteps of the FED or BOE tommorow?

  • happypip

    Thanks for the comments everyone! Pipnigma, I don’t know if or when the BOC will initiate QE, but we will most likely hear tomorrow. In my opinion, as long as unemployment continues to rise, we won’t see improvement in any other aspect of their economy. Where is the growth if more and more people are losing their jobs or unable to get a job? This may last long enough for more and more of the major central banks to initiate QE, including the BOC…. Now, does this mean traders will punish the Loonie if QE takes effect? Probably, but who knows? hehe Of course, we’ll just have to wait and see tomorrow… stay tuned :)

  • LoboTrader

    I’m short 1.2368 Good Luck to all

  • pipnigma

    Hi happy pip. any thoughts on BOC announcing their own version of QE perhaps following the footsteps of the FED or BOE tommorow?

  • happypip

    Thanks for the comments everyone! Pipnigma, I don’t know if or when the BOC will initiate QE, but we will most likely hear tomorrow. In my opinion, as long as unemployment continues to rise, we won’t see improvement in any other aspect of their economy. Where is the growth if more and more people are losing their jobs or unable to get a job? This may last long enough for more and more of the major central banks to initiate QE, including the BOC…. Now, does this mean traders will punish the Loonie if QE takes effect? Probably, but who knows? hehe Of course, we’ll just have to wait and see tomorrow… stay tuned :)