Tomorrow many say it is a super Wednesday, you know Governor Poloz taking centre stage with that highly anticipated rate announcement and then the inflow of important statistics from the UK and then we have Yellen testifying. I expect her speech won’t be market moving because her speech was release earlier and every bit of it has been dissected by investors and analysts. Well, to me, it will be what BoC and Governor Poloz will say in the NY session. Fundamentally, the Loonie has been shredding other currencies in the last two months and if and that’s a big IF, rates are raised as widely touted, the CAD will appreciate considerably. On the other hand, if they don’t and retain their rates at 0.5%, contrarian theory will kick in and all I can urge investors is don’t be caught on the wrong side when market expectations are not met. I will compare the current situation with what happen to all the USD bulls in 2015 when Yellen didn’t raise rates in September-eventually doing so in Dec when investors’ disappointment resulted in a 300-400 dip of the USD. Technicals were pointing to a possible disappointment but since emotions were high, many ignored the perfect buy set up then. It is exactly the same scenario right now, there is a strong buy signal printed in the daily chart but it will take the strong hearted to fade the market and dump the CAD. I will take my chances, small trade lots and dump the CAD despite the strong conviction/overconfidence in the market that there is a likelihood of a rate hike.
In the daily chart, there is a 3 pattern reversal with today’s candlestick confirming trend shift. What will happen is enter long in the 1HR chart when there is a retracement towards 61.8% Fibonacci level or a buy signal resulting from a buy signal by the stochastics. Already we have that buy signal printed with a series of lower highs in relation to the lower BB. Keep it simple and trade with a 60 pip stop loss-that is almost ADR of this pair and aim for 400 pips in last month’s highs of 1.026.
Trade as follows:
Buy Limit: 0.9815
Stop Loss: 0.9760
Take Profit: 1:5 to compensate your risky trade. Aim 1.026 in the long term.
of course guys, these are my thoughts, let me know what you think in the comment section
Have a good trading day.