It looks like luck wasn’t on my side with my short-term USD/CAD setup, and with no catalysts in sight to potentially change the tone in USD/CAD, I’ve decided to close the trade for a tiny loss. Here’s a quick review.
Short-term Setup on USD/CAD
Last week, I decided to put on a short-term trade on the idea we may see the Dollar’s recent bounce continue a bit further with the upcoming U.S. employment update.
I was confident in this potential scenario playing out as recent business survey data pointed to a continued rebound in the jobs market, an idea that was confirmed further the following days as ADP jobs data jumped (adding more than the expected 749K jobs) and as the weekly jobless claims came in below expectations.
My long position was triggered at 1.3305 on a pullback to the previous support area, and again, with the data supporting my idea, I held the position into the NFP jobs report.
Unfortunately for my trade, the government’s non-farm payroll report came in at 661K, far below the 800K estimate. But that didn’t really seem to matter as the reaction was limited, probably due to traders focusing on the surprise news of the Friday session when U.S. President Donald Trump announced on Twitter that he was positive for COVID-19.
After that news, which sent markets into risk aversion mode during the Asia and London trading sessions, I decided to hold on to my long USD/CAD position in case risk aversion became the main driver for days to come.
But as we start a new week, it looks like positive risk sentiment has come back as optimism grows on Trump’s health, and with no catalysts scheduled ahead to potentially shift sentiment back to risk aversion, I decided to close my trade down manually (1.3265) and move on:
Total: -40 pips / -0.16% loss on 0.50% max risk
Looking back, my trade was slightly positive throughout Friday, and I probably should have closed then. The news of Trump’s health was a new input that I didn’t plan on, so I should have taken risk off and re-assess.
Other than that, I think it was just bad luck that the NFP number came out the way it did given the data preceding it.
That’s something I cannot control, but I think I did the right thing but cutting the trade-off now given the risk sentiment (likely to continue to be positive as Trump recovers and on the possibility of a U.S. stimulus deal) and data outlook for the rest of the week (we could see a potentially positive Canadian employment number on Friday).
So, that’s it for now. Stay tuned a new idea soon, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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