USD/CAD last week

Trading Discussion
1

EURUSD got a thread, GBPUSD got a thread, why not USDCAD.

I didn’t had time to comment it last week but since I am bored today I wanted to share the observation I made :slight_smile: Especially about what happened friday during the US session.

USDCAD was very bullish during Jully. Then in August we had high and lows, the pair struggling at the resistance of 1.095.

On monday 25th the pair made a new high (point A on the image). A new high on a monday and despite the bad data that came on the US home sales? That was surprising, to me at least. However after this new high the pair went back down. The price pushed a bit to the stops then fell back. Luckily I never trade breakouts and was bullish on USDCAD so I was observing quitely. The fact that the pair did not explode up at the resistance probably meant a dip would follow, but countertrend moves / short time moves is not what I do.

On Tuesday 26th there was lots of US news, but the pair glided down slowly like nothing happened (point B on the image). Then on Wednesday 27th, which is generally a busy day but which had no big news for that pair, USDCAD fell hard. It felt a bit unatural from the fundamentals perspective to me. Why such a sudden fall? I concluded ‘the smart money’ was purpusly letting it go down to get a low bullish entry. That’s all good, because that is my kind of entry. And I did open a long trade on the end of the day (point C on the image), expeting for a bounce up during the rest of the week or the next week.

On thursday 28th (point D on the image), the news should have made the rally I was waiting. (bad CAD data and several good US data). But the pair didn’t move much at all. It seemed the smart money was absorbing all the volatility. I doubted seriously the strategy that led me to open a long the preceding day. It seemed the pair would go down even more after all. I hesitated to close my trade but didn’t, trying to stay ‘disciplined’, maybe the pair just need more time for the order books to be filled after all.

I found friday very interesting. With the contradictory news on CAD, the pair formed a short reversal just at the level of the week low. Then US data came and it was good. I was happy to see that of course, with the good US data I was hoping this trade could end well after all.

But a few minutes after the good US news, the pair fell hard ‘out of nowhere’, just enough to hit my stop (point E on the image). Well it is my fault, it was a bit tight from the larger timeframe poitn of view. Now the funny thing, just after hitting my stop (and I am guessing, most of retailers stops), the pair went back up to form a nasty hammer on the daily. The pair made a nice stop hunting move on the low timeframe range, most people being long having probably a stop around 1.0820ish.

After all that, is it gonna go up like a rocket now? When my broker closed on friday it looked like that, but I guess I should be ready to be surprised, as always.

Anyway, it is interesting to see how the pair moved against the obvious expectations, ignoring the news for example, but in a general direction that could have been anticipated from a market logic point of view. And how it ate up the stops to bounce back to the ‘correct’ direction.

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2

Try this
USDCAD

Loads of threads on this pair…

:slight_smile:

3

Well, there’s a reason why this pair is called the loonie. It’s an absolute lunatic to to trade outside of news releases. My worst pair but still my favorite.

4

Well it is not as much the USD/CAD pair that interest me but more the behavior of the price doing ‘tricks’ reguardless of the news and with what looked like a hunt for volume. Reguardless of the name of the pair, would you have had the same toughts as mine?

5

Everything is logical with this pair only in hindsight.

A while back when I was studying it, I found that the pair has 10 ways of reacting to data releases, all of which could look logical. After failing to predict which way it reacts for a while and blowing my account due to the lure of USDCAD pips (in oanda canada, usdcad pips yield the greatest return), i decided to reduce my exposure of trading pairs that share the same active session. You could say that’s because of volume.

6

That’s interesting. 10 ways of reacting to news data? I am not sure what you mean there, I can image the pair going with the data, against the data, ignore the data, or do a move with a reversal in both direction, but that is only 5 ways. When you say you failed to predict how it will react, do you mean you were testing out newstrading?

Because I did that too in the past, unsuccesfully, but I still keep a close eye on the news, and more importantly the price reaction to this news, as shown in the OP. It is a growing part of my decision making (I am a discretional) I find that checking if the price movement follows the news (or not) makes a good short-term sentiment analysis. In the OP, I had guessed the price would fall after point A, and on point D again, despite my bullish point of view, just by observing the price reaction to news. Even if I did not take advantage of this, with another system I may have…

When the price does follow the news, there is not much to do from it, there is no surprise and there is nothing to anticipate as the move allready happened. However in my opinion, when the price does not follow the news, it is a very important information. It shows something is going on and you’d be better to figure it out.

Also I think the market mechanics must be understood well. Pairs like EURUSD like to stop-hunt. Some say it is the evil smart money riping off the newbies. I disagree. It is simply the only way the price can move, there is no evil in this, it is mechanical. A large volume of orders must be opened for a trend to be created or reversed, and the best way to fill large orders is to run through the stop levels. There are other ways of finding volume, like hitting TP levels and trail levels, but that will surprise fewer people and happen probably only when the sentiment is strong in a given direction.

I think that if the pairs have different behaviors, it is because:
1-they have different volume needs
2-the sentiment of traders is more or less clear
The loon on the canadian coin is confusing everyone. USDCAD is not loonie, there are reasons behind the behavior. If I had a proper volume indicator and sentiment indicator it would be clear. Anyway, that’s my opinion.

7

Hello to the OP…

I enjoyed your post… For me, more and more, it is about ‘the bigger picture’… I am moving to fewer trades and holding them for weeks, and maybe months…

For the USD/CAD, for example, when looking at the last forty years of price history, the level that has been recently rejected as Supply(=Resistance) zone is the same that was Demand (=Support) in 1991-1992, namely the 1.20 - 1.30…This is a major level, possibly, so we require a bigger catalyst, a bigger fundamental event to push past it… However, when you look at the early 2000s (before the last financial crisis), this pair reached great heights:

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This means that, if we did go past that 1.20 - 1.30 zone, there would be a lot of room to move and retrace to the upside…

There was a time in the last couple of years when this looked like a safe pair of hands, as a rising channel with a predictable, steady behaviour… However, the USA and Canadian economies are closely tied together as major mutual trading partners, so what is good news for one may not be necessarily be bad news for the other…

Food for thought…

Happy trading.

8

I was testing out the pairs reaction to the news after the initial spike, that is, does it reverse initial gains or not. Yes, those are a few ways, but when you factor in the 3 tiers of data plus the 2 major times of news releases, taking into consideration the days when there is a news release between these 2 major times, I was able to summarize it into 10 points. but this pair still went loonie on me.

9

I don’t usually trade comdolls, but USD/CAD’s price action caught my attention too! Based on Pip Diddy’s post, most of last week’s moves have more to do about USD demand than economic data. For example, USD fell hard near the end of the week on month end profit-taking.

Maybe the dollar’s PA is more pronounced in USD/CAD because the BOC is relatively “neutral” with its recent policies?

10

Good points pipmehappy and huck. (And pip diddy’s indirectly). I wonder how much end-of-the-month profit taking affect the quotes in general. I never tought of studying that.

In my OP I was saying I had a feeling the price would rocket up to the last weeks high after Friday’s hammer, and so far I stand on that opinion. Yesterday the price was ranging but it was bank holiday for us and canada. The asian session was very bullish.

In about three hours we have US data coming. And a good occasion to check if my scenario will old true or not :wink: