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Trade Closed: 2012-09-21 2:05

Just when I thought that I had a good trade setup this week, two wildcards had showed up to drag the Loonie against the Greenback!

The first is the continued drop in oil prices. Oil slipped (pun intended) for the fourth day in a row last Wednesday after the U.S. oil inventories went up by another 8.5 million barrels last week. That’s a lot higher than the 1 million barrels expected by analysts!

USD/CAD Trade Closed

It also didn’t help my trade that investors are getting more concerned about the EU leaders’ commitment to a banking union, the Spanish bailout, and a potential reversal from the QE3 rally. Lastly, USD/CAD wasn’t able to withstand the onslaught of Loonie sellers as it broke above its consolidation on the near the .9750 area. The pair broke above its resistance and went up to the .9800 area. Boo!

Thank goodness I only risked 0.5% of my account! Here’s the damage:

P/L: -50 pips / -0.5%

Oh well. It was a good technical setup at the time. With market sentiment changing almost as fast as I change my mind over what dishes to cook for the weekend, I guess it would be beneficial to my next trades if I watch my trades more closely and pay more attention to fundamentals and market sentiment.

How about you? How have your trades been doing this week?

Trade Idea: 2012-09-19 1:45

I’m back in the trading grind with this short trade idea! I spotted three technical signals to short USD/CAD, on top of my bearish fundamental bias for the pair, so I jumped in!

For one thing, Big Pippin pointed out this bearish divergence that formed on the pair’s 4-hour time frame as price made lower highs while stochastic made higher highs. When stochastic started to move further down and the 38.2% Fib held as resistance, I decided to pull the trigger and short at market around .9730.

USD/CAD Trade Idea

Another reason why I’m bearish on this pair is that it’s on such a strong downtrend that it even broke below the .9850 major support level and made new yearly lows last week. In fact, after a slight pullback, the pair formed a spinning top on its daily chart.

And let’s not forget the huge gap between the Fed’s and BOC’s interest rate expectations. On the one hand, we’ve got the BOC considering tighter monetary policy as they believe that domestic demand will keep the Canadian economy afloat for the long haul.

On the other hand, the Fed finally gave in to QE3 last week as Big Ben and his men announced an open-ended easing program alongside Operation Twist and an extension of its low interest rates pledge.

So there you have it! Three technical signals are telling me to short USD/CAD now and these are 1) the bearish divergence on the 4-hour time frame, 2) the 38.2% Fib holding as resistance, and 3) the spinning top on the daily chart. Of course this reinforces my bearish fundamental bias on USD/CAD based on their central banks’ monetary policies.

Here’s what I did:

Shorted USD/CAD at market (.9730), stop loss at .9780, profit target at .9630.

I’ll be moving my stop to entry once price dips below the .9700 handle and if all goes well, I’ll be lookin’ at a 2:1 return on this trade. I risked 0.5% of my account on this trade and you should check out our risk disclosure if you plan to take the same trade.

Do you think I’ll be able to win this one?

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Have fun and good luck trading this week, friends!

Happy time

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