The battle of oil heavyweights in G10 FX
Updated
Trade set up - We are cautiously optimistic when it comes to USDCAD and looking to trade the pair as a proxy of US crude and Western Canadian Select (WCS). We enter the trade long at the current price of 1.3295, with small position sizing and tight stops set at 1.3200, for a break of the bullish channel. However, if we see a break of 1.3182 (22 November low) our view shifts to being aggressively short.
Why we like this trade - Price action looks ripe for technical traders, with price holding above the 5- EMA, while also oscillating in a bullish channel. However, as mentioned earlier we are careful when entering this trade as stochastic momentum is presenting negative divergence (with price). While we have also seen a failed break of the recent high of 1.3323.
Fundamentally, we feel there is a mispricing of US and Canadian rate hike expectations in 2019 with Canada pricing in almost two hikes and the US just one. We feel the pricing in US rates is justified, but we feel the market is too optimistic on Canadian hikes, given the collapse in WCS since the BoC turned neutral in October. While we keep out initial position to a minimum a daily close through 1.3323 and we would add to the position.
Disclaimer.
Trading leveraged products carries a high level of risk and may result in you losing substantially more than your initial investment. Pepperstone Group Limited is licensed and regulated by the Australian Securities and Investments Commission (AFSL 414530). Pepperstone Limited is authorised and regulated by the United Kingdom Financial Conduct Authority (FRN 684312). This information not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation
Why we like this trade - Price action looks ripe for technical traders, with price holding above the 5- EMA, while also oscillating in a bullish channel. However, as mentioned earlier we are careful when entering this trade as stochastic momentum is presenting negative divergence (with price). While we have also seen a failed break of the recent high of 1.3323.
Fundamentally, we feel there is a mispricing of US and Canadian rate hike expectations in 2019 with Canada pricing in almost two hikes and the US just one. We feel the pricing in US rates is justified, but we feel the market is too optimistic on Canadian hikes, given the collapse in WCS since the BoC turned neutral in October. While we keep out initial position to a minimum a daily close through 1.3323 and we would add to the position.
Disclaimer.
Trading leveraged products carries a high level of risk and may result in you losing substantially more than your initial investment. Pepperstone Group Limited is licensed and regulated by the Australian Securities and Investments Commission (AFSL 414530). Pepperstone Limited is authorised and regulated by the United Kingdom Financial Conduct Authority (FRN 684312). This information not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation
Trade closed: stop reached
Trade closed, stop of 1.3200 reached.Note
Interesting to note - a daily close below 1.32 would have kept this trade active and into a long profit.
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