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And I’m in! I had a brief moment of indecision after the surprisingly upbeat FOMC statement last week, then I waited for a slightly better entry price to short.

Short USD/CAD Trade

I didn’t want to miss any opportunities to short this pair on its long-term downtrend, so I kept my eyes peeled for quick pullbacks. This particular one has come together as neatly as the Duchess of Cambridge’s outfits, with the descending trend line resistance lining up with the 61.8% Fibonacci retracement level and a former support zone.

USD/CAD 4-hour Forex Chart
USD/CAD 4-hour Forex Chart

In my initial trade plan, I was ready to short around 1.2375 but I decided to remove my limit orders when the Fed sounded even more hawkish than usual. Not only did they keep the door open for a December hike, but they also upgraded their GDP forecast for the year and confirmed that the balance sheet runoff would start in October.

Around the same time, there have been some jawboning remarks from BOC policymaker Lane who mentioned that they are watching the Loonie’s appreciation closely. Earlier this week, though, this was overshadowed by the Canadian Finance Minister’s remarks on how the economy could continue to outperform even with their currency’s exchange rate levels.

In his speech this week, BOC head Poloz clarified that future monetary policy action will be data-dependent and that there is no pre-determined path for interest rates. However, he did mention that most of the factors weighing on inflation will dissipate over the next 12 months, which could mean more hikes down the line.

Apart from that, the upside pressure in crude oil could also be bullish for the positively-correlated Loonie in the coming weeks. On top of speculations that the OPEC would go for another extension of their output deal, the latest batch of inventory data from the API and EIA indicated surprise draws in stockpiles.

As for the Greenback, Yellen’s less hawkish tone during her latest speech led many to doubt that a December hike is in the bag. She admitted that policymakers may have overestimated the strength of the labor market and its impact on overall inflation, which suggests that dollar traders might sit tight ahead of next week’s NFP release.

Here’s what I have:

Short USD/CAD at 1.2440, stop loss at 1.2675, profit target at 1.2075. I’ve risked 0.5% of my account for a potential 1.49-to-1 R:R. 

What do you guys think?



See also: Q2 2017 Trading Performance Review

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