So much for trying to catch a Loonie selloff on weaker crude oil! Supply concerns lifted the commodity while hawkish BOC rhetoric added a boost for the currency. With that, I’m jumping out of this short position.
Short CAD/JPY Idea
In my trade idea a few weeks back, I spotted a couple of head and shoulders patterns on the daily and 4-hour charts of CAD/JPY. I decided to hop in on a break of the neckline on the shorter-term time frame.
But as you can see from the chart below, the pair didn’t really show much bearish traction and instead climbed back above the neckline. Price also made its way past the 85.00 mark again, so I thought it was about time I cut my losses.
In hindsight, I probably should’ve exited much earlier when crude oil showed no signs of slowing from its climb. Market watchers seemed more tuned in to supply constraints, such as sanctions on Iran and the force majeure in Libya’s oil field, rather than the incoming pickup in OPEC output.
And even in those days when the Loonie appeared to break free from its oil correlation, the currency itself was able to draw support from risk-taking and the relatively upbeat BOC outlook.
For a moment there, it seemed that head honcho Poloz was leaning towards the cautious end but he soon clarified his optimistic stance. That would’ve also been a good opportunity for me to exit this short Loonie play.
Anyway, here’s what I ended up with:
P/L: -250 pips / -0.42%
Not the best way to start the quarter, I suppose? I probably should’ve picked a pair with fewer event risks to contend with, but that’s easier said than done these days.
Any setups you’d like to share to help me out?
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