Good Morning, Friends. Sometimes, if a trade doesn’t work out in one direction, it’s worth looking to go the other way. In the case of USD/CAD, a long, substantialÂ move lower – dominated by the flows of central banks and sovereign wealth funds looking to diversify out of USD and EUR – now shows signs of reversing on the daily chart.
The market seems to be poorly positioned; the most recent CFTC data showed a large net CAD long of $9.5 bn. In addition, Canadian banks close their books for the fiscal year on October 31, at which time they will be expected to be essentially squared up, with only small net positions.
All of this would suggest that if USD/CAD can push above the parity (that is, 1.000) level, there should be some wailing and gnashing of teeth, accompanied by short-covering. I wouldn’t put a buy stop in at 1.0001, as there may be large defenders, but a move above 1.0010 would suggest that the stop losses were being triggered, with more upside ahead. I would suggest a trailing stop, a technique taught by Todd in his course, as the optimal way to try to take advantage of a favorable move.
Best of luck!
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