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Short term
Trade view / 24 August 2016 at 13:54 GMT

No Jackson Hole-in-one for Loonie

FX Trade Strategist / www.Loonieviews.net
Canada
Instrument: USDCAD
Price target:
Market price:
Background

FX markets have convinced themselves that Fed chair, Janet Yellen’s speech at the Jackson Hole symposium on Thursday will be akin to a spotlight being shone inside a cave – Illuminating. They are slightly concerned that she will use the opportunity to confirm the recent hawkish comments from her colleagues. If Yellen’s speech is deemed to be hawkish, the US dollar will rally and the Canadian dollar will be a victim.

The intraday USDCAD technicals are bullish while prices are above 1.2890 supported by the trend line from June which comes into play at 1.2760. A break above 1.2980 (50% Fibonacci retracement of August 1.2760-1.3200 range) targets 1.3032 (61.8% level). In addition, the downtrend from the August 8 peak of 1.3190 was broken with the move above 1.2850, on August 19.

Negative oil price sentiment may support USDCAD as well. Talk of a price support agreement being struck in Algiers is just that, talk. Yesterday’s API Crude Stocks Change showing a build of 4.464 million barrels drove WTI through the intraday uptrend line. If today’s EIA report confirms the API data, WTI should retreat.

A hawkish Yellen, and weaker oil prices suggests renewed upside for USDCAD.

Management and risk description

There are a lot of risks to this trade, particularly oil price sentiment.  If oil traders go back to thinking that the Algiers Opec meeting could result in a price support agreement, WTI will rally and the stop will be triggered.   It is vulnerable to a shift in sentiment ahead of Janet Yellen's speech or if her speech is thought to be dovish.

In addition, USDCAD resistance in the 1.2990-1.3010 area may prove insurmountable and limit topside gains.

Trade idea parameters

Buy ½ USDCAD at market (1.2935) Balance 1.2905

Stop: 1.2875

Target: 1.3080

Time horizon: 4 days

Chart USDCAD 30 minute showing intraday uptrend and stop loss
usdcad
 Source: Saxo Bank 

Chart: USDCAD 4 hour highlighting Fibonacci retracement levels 
usdcad
 Source: Saxo Bank 

Chart: USDCAD daily with moving support line and broken downtrend line shown
usdcad
 Source: Saxo Bank

Chart: USDCAD 5-year daily with moving averages.
usdcad
Source: Saxo Bank

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
1y
izwansamba izwansamba
Thanks michael. Do you have any class? How much if i want to join? im from malaysia.
1y
Market Predator Market Predator
Hello Mike, nice reading. Could You please help me to understand something really strange? How can be explained so enormous decrease of Volume in continous Gold Chart?
1y
Michael O'Neill Michael O'Neill
Hi Market Predator: Saxo Bank's Ole Hansen is best suited to answer this inquiry. He is the Head of Commodity Strategy at Saxo Bank. My guess and it sis only a guess is that traders are sidelined awaiting Janet Yellen's speech tomorrow night.
1y
Michael O'Neill Michael O'Neill
Hi izwansamba: At the moment, I do not hold any educational sessions. However, TradingFloor has a wealth of tools to help you develop your trading skills and gives you access to a large number of in-house market experts. Pick a few and follow them closely.
1y
Philidor Philidor
On the volume, I think that must be an error. It's better to look at next months future contract for volume, at least there you know where the data is from and it's reliability. Use continuous charts just to get a multi-year picture.
1y
Market Predator Market Predator
I know Ole is commodity specialist, so I squawked at the end of July to Ole's profile, but he was 3 Wks off and I didn't want to disturb him more with this issue. Never mind, I wish You a great day :)
https://www.tradingfloor.com/posts/good-morning-mr-hansen-would-you-be-so-kind-and-help-me-to-understand-why-there-is-so-extremely-lo-7956639
1y
Dj TinTin Dj TinTin
Hi Michael what's your take on the GBPCAD long
1y
izwansamba izwansamba
Ok sir. Tq for info. Will follow you closely. Really help me in trading 😊
1y
fxtime fxtime
Philidors suggestion is imho perfectly correct ...it is also prudent and sadly very old school but still remains robust is that you compare the spread between nearby month and the distant....typically when it widens you have (a first indication) of a bullish move as traders are usually willing to pay a premium for immediate delivery. Conversely a premium spread that narrows is bearish as commercial traders prefer to await future delivery and ignore current pricing. Vols in case can also replicate the above.
1y
Market Predator Market Predator
@Philidor + @fxtime thank you both for your opinions/remedies!
1y
Michael O'Neill Michael O'Neill
Hi Dj Tin Tin: On the original GBPCAD trade Idea, I recommended cancelling the seconf buy order and raising the stop loss to 1.6980.. Unfortunately, I got stopped but It was still for a gain. If you still have the position, we are close enough to the original TP level, that it makes sense to close the trade for around a 0.175 point profit. good for you.
1y
Michael O'Neill Michael O'Neill
UPDATE: This trade has boiled down to a hawkish/doveish Yellen speech. It wouldn't hurt to sell 1/2 position at the market (Currently 1.2920) which is break even, leaving you long the balance at an all-in rate of 1.2920. A doveish Yellen, or even a nothing Yellen speech will drive USDCAD toward 1.2850 while any evidence of support for the Hawkish camp should lead back above 1.3000
1y
Market Predator Market Predator
Hello Michael, thanks for update. Really boring session today (so far).

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