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Trade Closed: 2010-03-21 22:18

PoD Chart

Luckily, the Canada’s economic reports came in better than expected last Friday. The Canadian CPI came in line with expectations of a 0.4% uptick while the core CPI surged past consensus and posted a 0.7% climb. This pushed annual inflation above the BOC target, adding pressure on the central bank to hike rates earlier.

Additionally, their retail sales report beat forecast and printed a 0.7% increase for the month of January while core retail sales showed a nice 1.8% jump.

Needless to say, this allowed the USDCAD to fall to a low of 1.0062, hitting my first profit target at 1.0075 along the way. However, risk aversion from all the Greek debt drama forced the price to pull back up really quickly. I closed the second half of my trade at 1.0175 to minimize losses in case the pair continues to climb higher.

Closed 1st half at 0.1.0075: +75 pips
Closed 2nd half at 1.0175: -25 pips
Total: 50 pips / +0.25% Gain

Just a small gain but given how oversold the USDCAD is on the daily, I think it was a good decision to close early. I don’t want to get too attached to any trade right now.

Trade Idea: 2010-03-17 22:52

PoD Chart

I’m going to try to jump in on this downtrend on the USDCAD. I’ve popped up the Fibonacci tool, and it looks like the 50.0% Fibonacci level lines up nicely with a former support level at 1.0150. With stochastics showing upward momentum, I think we could still see price retrace back to this level before sellers come back to play.

I’ve placed my stop loss past recent swing high, at 1.0250. This would also be past the former support area at the 1.0200 handle. My profit targets are the weekly low at 1.0075 and the magical 1.000 mark.

From the US, we heard the Fed renew its commitment to keep rates low for an “extended period,” which could pressure traders further to keep selling the dollar all throughout the week. Not the first disappointing news I’ve heard from the US recently… I’m not too happy with this week’s American Idol results. But, if you haven’t watched the Top 12 eliminations, of course I won’t spoil it for you!

Anyway, on Canada’s side, it seems that its economy is starting to get better. In the most recent BOC statement, the bank indicated that inflation is picking up and the economy is starting to gain momentum. This gave traders reason to believe that the BOC could raise rates earlier than expected, which has pushed the USDCAD to yearly lows day after day.

To sum up, the Fed’s commitment to keep rates low, the improving Canadian economy, and the potential for an earlier than expected rate hike from the BOC are the reasons why I want to go short the USDCAD.

The amount of high-profile economic reports coming out of the US later, namely the weekly unemployment claims, the consumer price index and the Philadelphia manufacturing index, could provide the my trade the volatility it needs to trigger.

Here’s my plan:

Short USDCAD at 1.0150, stop at 1.0250, take profit at 1.0075 and 1.000.

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