Long USDCAD Profits Heavy

It was the EURNZD last week. Now it's the turn of the loonie. So far we've been hitting home runs week after week, helping many of our Premium Subscribers profit substantially just in time for the Christmas holidays. USDCAD closed Friday at the highs of the week, putting our 2 trades which are long the pair roughly 580 pips in the profit. Not many traders are able to accomplish this - adding to a base position with confidence, and holding on to a trade with conviction vis-à-vis choppy price action.

One only has to peer back into our journal to fully grasp the scale of these moves, and the potential profits traders could have made if they were in the right side of the markets and were able to flip sides quick enough to avoid vicious and sudden reversals.

Again, Subscribers to our Premium Signals Service were kept updated in real time on all of our positions and had exclusive first hand insight to our trading activity as it unfolded. These trades are real and legitimate, and are not the wrought workings of hindsight.

Markets have become increasingly unpredictable lately, in part due to an imminent Fed liftoff probably due this coming Thursday, the first time the Fed Funds rates would have been raised from their lower bound in the last 8 years. Even within the domains of the currency markets, trends are quickly reversing and becoming more idiosyncratic.

As usual, our approach on this trade was based on both fundamentals and technicals. When properly combined, we get stellar results. This is why we preach the importance of having both a fundamental slant when taking longer term positions besides having an edge in being technically proficient in analyzing price action on the charts.

Technicals

On the technical side, we went long USDCAD last Friday at 1.3362. Our second long was added this past Wednesday at 1.3535. By then, our first long was already up almost 200 pips. On the charts, a key motivating factor for us to be on the long side was a clear pre-breakout formation in prices. The passage of higher lows and higher highs in an uptrend channel meant that bulls were in control.

 USDCAD has been trading in a choppy manner inside an uptrend channel forming higher lows and highs. You can see where we entered our first long on the pair moments before it broke out to the upside without turning back. Our ability to identify a critical pre-breakout formation on the pair helped us position swiftly and accurately. Our second long was added when prices retreated into our "short term pullback buying zone". As at froday's close, both trades are roughly 580 pips in the profit.  

USDCAD has been trading in a choppy manner inside an uptrend channel forming higher lows and highs. You can see where we entered our first long on the pair moments before it broke out to the upside without turning back. Our ability to identify a critical pre-breakout formation on the pair helped us position swiftly and accurately. Our second long was added when prices retreated into our "short term pullback buying zone". As at froday's close, both trades are roughly 580 pips in the profit.  

The breakout occurred on Monday where pent-up buying cleared the last stack of offers and staged a rally through the psychological 1.34 figure. When we saw that breakout, we were pretty confident that the rally would continue to be fueled. As such, we wanted to add on a secondary long to our base position via a limited order.

In the chart, you can see how and where we identified what was then a potential "short term pullback buying zone" in which we were willing to be buyers. Timing the entry wasn't easy and aright forward because one of our buy limits was actually a couple of pips why from being filled in Wednesday (notice the first big down bar with a long tail in the mini corrective structure).

We initially though we'd missed the pullback bit still decided to trail our limit higher. What was probably by sheer luck, prices staged a second dip into our "short term pullback buying zone" on Thursday and filled our limit order with only a few pips to spare. We call that a close to perfect entry. There was basically zero drawdown. We could have placed a 5 pip stop loss on that order and be riding on a trade with a R:R of over 40x! That's pretty insane.

Our trade management on these 2 longs has been on point too. Stops have been moved above the entry price of our second long, and we've now locked in about 260 pips. We're not revealing our targets for the trades, and only our Premium Subscribers will know where we have positioned our take profit orders.

We expect the pair to run into some offers at about 1.3750 but considering how Friday's massive bull bar closed at its high, we have a feeling pullbacks will be shallow and far between.

Fundamentals

The first position was opened immediately after both the U.S. and Canada released their respective jobs data. The former saw a marginal positive surprise on the market consensus, while the latter missed across the board. It was pretty much a no brainier trade for us. A classic divergence play which has reaped a handsome windfall a week later.

On top of that, we were bearish oil prices in general but didn't want to be directly exposed to the commodity. Instead, we had been eying shorts on the so called "oil currencies" which includes the Canadian dollar. This past week saw oil prices crashing to 2008 lows, and bears don't yet seem to be contented with the pummeling.

We are bearish energy prices in general after OPEC folded during its latest summit; the cartel did not agree to cutting production as opposed to what markets were hoping for. The rest was history. Weak economic growth throughout the world manifests in the form of waning demand for the black gold.

Don't forget that Canada is already in a technical recession, and the BoC seems poised to ease monetary policy further. With the Fed set to raise rates from the zero bound this coming week (assuming they actually do), this pairs trade of sorts has huge upside potential with a downside that we can very much partially hedge out.

We won't be sharing too much of our ideas as we wish to reserve them for Premium Subscribers when we put out more of such trades in the future. But you see where we're coming from. Our framework isn't based on a singularity but a series of dynamic parts.

Conclusion

Finally, we're more than willing to turn on a dime, and take the other side of the market if we feel future circumstances warrant. A sudden reversal or sharp correction should always be expected and good traders are always prepared both mentally and with their accounts for that.

Again, if you wish to profit along side us and receive many more of such trades on a daily basis with no lag, join us as a Premium Subscribers by clicking the button below. We await you aboard.