SL @ 85.65
Updated Jan 17th
- CAD has been really strong recently due to positive fundamentals from oil market as the OPEC members seem to be binding on their agreement of output curb. Report also shows that China is expected to have more crude import in 2017. So oil market is looking good now, meanwhile, CAD had a good data last Friday to support the employment, and BOC is currently holding a neutral perspective on their policy. The recent USD weakness also helped the oil market and CAD. JPY on the other hand has continued to suffer from low inflation and devaluation of currency. People expect oil price to reach $65 per barrel which means CAD will continue to go higher and people expect BOJ to either ease more or hold on to their current policy, which is still a negative interest rate plus easing.
- The catalyst was today’s comment from Saudi and record shows that their output is curbed. The current USD weakness also helped this trade. We want to enter now because of the technical signal that give us a nice hammer - reversal signal. As Today’s market was a risk off sentiment to help JPY but CAD was still holding well to show strong strength.
- We’re in a consolidation area between 86 and 89.
- The risk is first if the USD regains its strength, then that will hurt the oil market hence the CAD. Second risk is another negative news from OPEC members. The negative news from OPEC is uncertain and cannot be predicted, but the USD regaining strength is almost for sure as the recent sell off was largely due to the press conference of Donald Trump, which is really a short term negative effect. Once the USD regains strength, that is going to hurt CAD but also hurt JPY as well, and we’re betting that the risk will be off set and people will want to buy USD versus JPY more than CAD. So that should support our trade as long as we have a larger stop loss.
- I’ll manage it with the current news update as everything is very sentimental driven.
- Yes I think this is a trade worthwhile to take but i think the initial stop loss has to be below the 86 zone for sure.
SL @ 85.65
- The pair had moved to a sideway movement because lack of fresh momentum from CAD or oil market
- Due to the Hard Brexit talk and PM speech for tomorrow, market has already anticipated a negative GBP and GBP has been largely sold off. On top of that, this week’s inauguration of Donald Trump also provides more uncertainty over the U.S policy and USD. The general market is in a risk off sentiment which helps JPY and hurt our trade. There are few possible scenarios: If tomorrow’s speech from PM May has proven to be a hard Brexit talk, we will see further selling into GBP and market reaction of negative sentiment, which will help JPY and really hurt our CAD/JPY trade. However, if the talk is proven to be less negative then we will see a large buy back and a changing in risk sentiment to on, which will help our CAD/JPY trade. The negative sentiment for USD will be remain as U.S policy continues to be uncertain, this alone will pressure USD and help oil price, which also help CAD. The oil market has another positive news from Saudi today to pledge for output cut and confident over the OPEC agreement, however, oil market still remains volatile.
- I’m still in this trade because my view is still in favour for oil market and CAD especially this week since USD will be weaken and that will help oil market and CAD. However, i’m very concern about tomorrow’s event that might set further negative sentiment to help JPY which stop us out.
- I will not get into this trade now because the uncertainty is high and the conviction has become low. Therefore, I decide to tighten the SL either with Hourly Swing Points or daily 3 bar exits. Right now everything is still the same because i want to see whether $86 can hold it. Usually i will tighten up with 3 bar exit @ 86.44 but it’s really not point to move SL so close to get whipsaw, we might as well give it more room to play and see if the handle can hold.
Updated Jan 17th
- The market reacted to PM May’s speech today with positivity and we saw large buying into GBP, the global market however is still in the negative sentiment from the uncertainty of US Donald Trump and policies. USD continues to be sold off while risk sentiment continued to be off.
- I think what will happen is that we’re in this neutral state sentimentally now, on one hand the dollar weakness has helped the oil market hence the CAD to be well supported, but on the other hand the global market risk off sentiment has also helped JPY which pressured our trade. I really have no bias in which way it going to go, it really depends on how the events unfold for next few days. Tomorrow’s BOC event might be helpful for CAD, or it might not. The equity markets might turn around tomorrow, or it might not.
- Honesty this trade has become really unattractive now, the only reason i’m still in is because if I get out now, I capped down my loss ahead of a neutral situation. Because $86 is still an important handle and we’re technically still in an uptrend, i decided to hold it further to see how it goes.
- I will not get into this trade as the situation is not benefited for either CAD or JPY. If you decide to get out now to recoup some loss, feel free to do so. This is more of a personal choice now.