The Loonie has been on a rally that I’d like to try to catch a ride on, and the charts on my latest USD ideas have changed, so it’s time to update and adjust!
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
Traders have been pressing AUD/CAD lower on a combination of a broadly weak Aussie (China slowing and weaking metals markets) and a recent improvement in Canadian data to support the Loonie. It was enough to break the strong support around .9700, but the question is now whether or we’ll see a retest and reversal of that level? If .9700 does get retested I’ll look to play that area for a short position with a wide stop of one weekly ATR. My initial target will be the next major support last seen Dec. 2013, but if the momentum remains strong, I’ll go for the 2013 lows for big profit potential. Here’s what I’m doing:
Short full position AUD/CAD at .9700, stop at .9870, initial target at .9400
I’m only risking 1.00% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.76:1 at my initial target. At my max target of .9200, my potential reward-to-risk ratio is about 2.94:1, potentially more if I add to a winning position.
Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary.
I’ve decided to close my open orders on my NZD/USD short and long USD/CAD ideas. NZD/USD moved far enough lower to make the probability of hitting the top of the range and my orders very low, and for USD/CAD, the Loonie’s strength makes shorting a very unattractive move at this time.
My short orders on GBP/USD were triggered to put me in a short position at 1.5970. I’ll look to hold onto that position for now as I think the Greenback is to the stronger of the two major currencies with the Fed already ending its QE and set to raise rates in 2015, but I won’t hesitate to cut the trade off quickly if today’s USD weakness turns into a medium term move.
That’s it for now and of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.