While initial price action looked favorable, CAD bears grew in strength this week to push the Loonie lower across the board, including my EUR/CAD short to its max stop level. Here’s a quick review.
Since putting on this trade two weeks ago, data has been mixed from both Europe (weak preliminary GDP reads vs. positive PMI reads) and Canada (positive manufacturing sales & inflation vs. weak retail sales and foreign security purchases data), which is likely the reason why we saw continue choppiness and consolidation in EUR/CAD. The price action actually looked favorable for another downside move with another mini-triangle forming in a downtrend.
But today, we saw burst of broad Loonie selling, and without direct economic catalysts I can point to, it’s likely on the dip in oil prices as rising U.S. supplies likely offsets OPEC cuts and some broad market adjustments ahead of the Bank of Canada monetary policy meeting tomorrow that drew in the bears. I guess the market believes we’ll get more rhetoric of trade uncertainty from the BOC, but we’ll have to wait and see tomorrow’s event if that’s the case.
Whatever the case may be for Loonie weakness, we saw strong move to the upside today, enough to take my short EUR/CAD position at at my max stop level of 1.4075 for a small loss:
Total: -259 pips / -0.50% on 0.50% risk
Overall, I’ll still take the Loonie over the euro (especially with the French elections around the corner), but with Canadian trade sector uncertainty and oil likely to weaken in the short-term, I’m gonna stay away from EUR/CAD for now. Maybe if it gets to that top falling trendline and if the dovish rhetoric lightens up from the BOC, then it’ll look interesting enough to throw on the watchlist once again. Stay tuned!
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