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Trade Closed: 2010-02-10 21:46

PoD Chart

No thanks to risk appetite, resistance at former highs held, putting a cap on any serious dollar gains. Needless to say, price eventually dropped and stopping my second position out at break-even.

In retrospect, I think I have let my trade run on for too long. For one, upward momentum was weak when the pair broke out of the descending trend line and two, resistance at the 1.0750 held strongly, three times in fact, indicating that buyers aren’t that strong. I should’ve taken these as signs to close my position early and walk away with a profit. Nevertheless, I am able to come out slightly positive since my first profit target was already hit last week.

1st half: +115 pips / +0.55%
2nd half: 0 pips / +0.00%

Total: 0.55% gain

Trade Adjustment: 2010-02-04 21:31

Whew! I’ve been holding on to this USDCAD long trade for quite a while now and it’s finally yielded some profits yesterday. Thanks to risk aversion, the pair rallied all the way up to my first profit target of 1.0750. I have another profit target located at 1.0850 so I might have to wait a bit longer before I fully close out this trade.

However, the US employment report is due later on and this could result to extra volatility. Although I’m hoping that the greenback would continue to rally on possibly good NFP results, I’ve decided to move my stop to my entry point in order to create a risk-free trade!

USDCAD Breaking past long term trend line: 2010-01-26 22:20

PoD Chart

Looks like that long term trend line broke yesterday, as the USDCAD has been rising the past week. Yesterday’s candle closed above the trend line though – could this be a sign that they pair will keep on rising?

First, let’s take at what’s been happening. Risk aversion made a comeback in the markets yesterday, pushing the safe-havens higher against the commodity-based currencies. What caused this? Well, it seems that we’ve got more news coming out from China indicating that the Chinese government is pushing for more restrictions in their banking sector. As long as China keeps making moves to “limit” their growth, this could dampen risk appetite across the markets.

Looking ahead, although Canada won’t be releasing any economic reports today, the US FOMC statement presents an event risk for my trade. Recent US data haven’t been particularly impressive, hinting at a slightly more cautious tone from the Fed. Come Friday, the US will report its fourth quarter GDP reading. The consensus is an economic growth of 4.5%, much higher than the downwardly revised 2.2% GDP reading for the third quarter of 2009. Canada is also set to report its November GDP on Friday and is expected to post 0.3% growth for the month.

Moving on to technicals, the pair appears to have just broken out of a huge descending triangle formation. And it looks like the breakout is valid since the latest daily price action is moving above the triangle’s resistance. I’m buying at market (1.0635) since I don’t wanna get left behind in case the price moves higher. I’m also placing a 100-pip stop loss, which is just below yesterday’s low. I’m setting my profit targets as well on the previous highs which are marked in the chart above.

Again, here’s what I’m going to do:

Buy USDCAD at market (1.0635), stop at 1.0535, pt1 at 1.0750, pt2 at 1.0850.

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.

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