How Far Will the Canadian Dollar Retrace

[B]My picks:[/B] Remain Short CADJPY, Go Long USDCAD
[B]Expertise:[/B] Combining Money Management with Fundamental and Technical Analysis
[B]Average Time Frame of Trades:[/B] 3 days - 1 week

The Canadian dollar has extended and accelerated the bearish reversal that began in the afternoon of yesterday’s US session. This move would finally resolve an ascending wedge formation in CADJPY that found a frequented range top around 89.00/40 and a rising trend that defined a rising floor starting back on May 21st. This relieves considerable bullish pressure behind a potential bullish breakout. My first target on this position has subsequently been tagged and the stop on the remaining half of my position has been moved up to breakeven to cut risk and leave my 85.50 objective to work itself out.

In the meantime, with no Canadian dollar specific risk in my existing position; I can once again look for another cross to speculate on. My interests this time around lie with USDCAD. With the drop in the loonie dollar, this pair has managed to rally nearly 200 points to break above a channel top (connecting the Apr 22nd, May 18th and Jun 8th highs) and 20-day simple moving average. This supports development of a meaningful reversal after a notable period of basing (through most of June). I will look for a close above this resistance but for confirmation not entry. A pull back to test former resistance as new support is likely - and more importantly improves a risk/reward profile. I will put entry for a position at 1.1155. An aggressive setup can put carry a stop at 1.1055 (100 point risk) with a first target equal to risk at 1.1255. Alternatively, a cautious approach can be set with a stop below the past two week’s range low at 1.0925 and its objective would therefore be 1.1385. A secondary target for either scenario will be 1.1620; and the occassion of hitting the first target will be used to trail the remaining position’s stop to breakeven. It is imperative to adjust position sizing accordingly to maintain a reasonable risk level.