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I decided to close this trade manually so I could cut my losses early.

There were some technical signals confirming that I caught a bottom on this short USD/CAD trade, but the weak Canadian retail sales data was the final straw that pushed me to exit the market.

It’s so weird how December retail sales slipped by 0.2% when everyone’s supposed to be enjoying a holiday spending spree!

Core retail sales also came in worse than expected, logging in a 0.6% increase instead of the projected 0.7% rise.

On top of that, the previous month’s figure was revised downwards. I guess that just means Canadian GDP growth for the fourth quarter of the year would most likely disappoint as well.

USD/CAD closed early

Meanwhile, traders mostly ignored the 2.4% drop in the S&P home price index in the U.S. and focused instead on the three-year high CB consumer confidence figures. “Yipee!” for the U.S., “Boo!” for my trade.

So how could I have played this trade better?

I should’ve set my entry point a bit lower than .9820. As I mentioned, breakout trades aren’t exactly my strong suit but I decided to give this a try. Now I know better and I’ll probably stay away from these types of setups!

Still, I think I did a pretty okay job at staying on top of my fundamentals this time around, but I could’ve also done better at identifying a good entry point.

I could’ve waited for the retest of the .9850 broken support level and shorted there. I would’ve wound up with a loss just the same, but it would’ve been much smaller.

Also, I should’ve taken a hint when my entry at .9820 formed a range with the previous .9850 support. It bounced along with the range like it was dancing to Chris Brown’s Yeah 3X before it was once again supported by the .9850 handle.

It wouldn’t hurt if I also checked different time frames in my next few trades. Just like LoboTrader pointed out, there’s a bullish divergence in the weekly chart that could’ve helped me adjust my position.

Here’s how it turned out:

P/L: -50 pips / -0.5%

Trade Update

USD/CAD did break below .9850 as I predicted, but it looks like it’s now forming a new range.

And, unfortunately, the bottom of the range is just where I got triggered! This is too bad for me because like Dev’s new single, I like my pips fast and my losses down low.

Anyway, the good thing is that the .9850 former support area seems to have turned into resistance, and I’m hoping that the rise in crude oil prices can keep the Loonie strong.

After all, conflict in the Middle East seems to be growing worse now that Libya is following Egypt’s footsteps.

This has already driven oil prices to their two-year high and, if the unrest spreads to other oil-producing countries, prices could keep rising and so will the black crack-related Loonie.

In retrospect though, I probably should’ve been a little bit more patient and waited for the retest of the broken .9850 support.

Another option would’ve been putting my entry order a bit lower than the significant .9820 figure. I could’ve watched the pair a bit longer until I had more signals that the pair is heading south.

Oh well, since my trade idea was based on rising oil prices and broken .9850 support, I think I’ll hang on to this trade a bit longer until we get hold of more reports.

I’ll be on my toes for the big retail sales report from Canada today, as well as the CB consumer confidence and existing home sales reports from the U.S.

If data from both economies invalidate my trade idea, then I might consider taking out a part of my position or closing my trade entirely.

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.