Trade of the Week 03/05: short USD/CAD

(Video Transcript)

Short EUR/GBP

Hello and welcome to the Trade of the Week on Tuesday the 3rd of May.

Last week, we went short EUR/GBP at £0.8425 with a view of it heading lower. We had a downside target at £0.83 in mind and a stop-loss at £0.8515.

If we look at the daily chart, we can see that we have indeed come off from last week's levels and we briefly went up to £0.8467 but we didn't get stopped out because our stop was placed slightly above the March high and we are now still heading lower.

Now, the £0.83 target was perhaps a little bit ambitious and what we could do on that trade is maybe raise the target level to £0.8360 where the orange line comes in, the 55-day simple moving average (SMA), and perhaps lower our stop from £0.8515 to simply break even at £0.8425, which is above yesterday's high. Therefore, if we get stopped out, at least we have no loss.

USD/CAD

This week we are looking at USD/CAD.

Now, as we all know, the US dollar is trading at multi-year highs against a lot of different currency pairs. What is interesting on the USD/CAD chart is that we have risen very sharply with regards to the US dollar compared to the Canadian dollar, but we stalled last week around the March high at $1.29 and we are likely, given the chart pattern, to do so again this, or next, week.

So, because we failed back in September and December as well as in March between $1.29, basically, and $1.2964, the trade is to go short against the trend with a stop-loss level above these highs and a view of returning back down and retracing lower towards the lows seen last week. This was made to $1.2720 or so. So we could go short.

I wouldn't go short just now, but wait for the market to go a little bit higher because in the short-term this looks likely to be the case ahead of tomorrow's Federal Open Market Committee (FOMC) meeting.

So this week's Trade of the Week is to go short USD/CAD at $1.29 with a stop-loss at $1.2970 and a target at $1.2720.