Short AUDCAD - residue play post rate hike (Late Entry)
This morning as the beginning of Asia session you can see that the market bid up AUD prepping for a good Trade Balance Data. This is kinda hit and miss historically, I just did a quick statistics analysis to data release since end of 2013 and the missed forecast currently at 49%. Not very encouraging for a certain bet.
The price action up until the announcement was strongest in AUDCAD, which again tilting the odds in the Short favor. If data is a hit, it likely won't move much further given the pair has had a big retracement since CAD rate hike last night, on the other hand a miss would prepare you the best entry to squeeze out the last juice from the rate hike. Again, retail IG Sentiment is Long, I wanna be Short.
Technical level was 0.98 and this week Pivot at 0.9817.
I did not take the trade as I was away from desk but if it's retracing to just around the 0.98-0.9792 (Last Week Pivot) I will enter. Target wise, I'd love to hit the 0.971-0.972 area but it won't get there if there is no further support from CAD news coming Friday. As for AUD, I don't expect Governor Lowe to make any hawkish remarks. It's still a bit of a risk event that if you make early entry now and trail your stop loss just before the speech, I believe that gives a better protection.
The price action up until the announcement was strongest in AUDCAD, which again tilting the odds in the Short favor. If data is a hit, it likely won't move much further given the pair has had a big retracement since CAD rate hike last night, on the other hand a miss would prepare you the best entry to squeeze out the last juice from the rate hike. Again, retail IG Sentiment is Long, I wanna be Short.
Technical level was 0.98 and this week Pivot at 0.9817.
I did not take the trade as I was away from desk but if it's retracing to just around the 0.98-0.9792 (Last Week Pivot) I will enter. Target wise, I'd love to hit the 0.971-0.972 area but it won't get there if there is no further support from CAD news coming Friday. As for AUD, I don't expect Governor Lowe to make any hawkish remarks. It's still a bit of a risk event that if you make early entry now and trail your stop loss just before the speech, I believe that gives a better protection.
Comment:
This trade is still on-going, just as I thought, the market ignored the bad CAD data, if the Ivey is good as expected there is no worry (actually it shouldn't be that much important).
Comment:
The CAD data really was a bad surprise. This somewhat cast my doubt on tomorrow data. I'll still hold this trade but it does not seems to be as attractive as I thought it was at the beginning. Still counting on the good data expected for CAD tomorrow.
Comment:
Just re-read Debelle's July statement. It was Dovish in my opinion. Now that CAD is raising rate again just recently, I hope he repeats something similar to last time:
"And last week the Bank of Canada increased its policy rate to 0.75 per cent. Just as the policy rate in Australia did not need to decline to the very low levels seen in other parts of the world, the fact that other central banks increase their policy rates does not automatically mean that the policy rate here needs to increase."
That will be really good for the trade. Market does not seems to think so as it went higher since morning. I'm more confident on this one especially when I'm at odd with the net long retail crowd.
"And last week the Bank of Canada increased its policy rate to 0.75 per cent. Just as the policy rate in Australia did not need to decline to the very low levels seen in other parts of the world, the fact that other central banks increase their policy rates does not automatically mean that the policy rate here needs to increase."
That will be really good for the trade. Market does not seems to think so as it went higher since morning. I'm more confident on this one especially when I'm at odd with the net long retail crowd.
Comment:
Price action continue to go against my analysis so I find it necessary to dig a bit deeper as the trade goes back into negative territory.
So the recent impact from Lowe's speak on 5 Sep as well as the RBA's rate decision was generally not as Dovish as I thought as price bounced around during the rate decision than generally going up after a short break down after Lowe's speech. AUD actually reacted positively to both his remarks and the rate statement.
By default, if he doesn't change his view a lot from 5 Sep, market would react positively or even front running him into the speech. I totally missed this. Another item to be on my checklist: past reaction to the speaker's speech.
Another I find that I may be missing out on is a deeper analysis of the retail sentiment, again here I was too fixated on looking at only AUDCAD pair while this kind of analysis is better from the broader AUD view. I have taken a look across the AUD pair and find that actually most retail are also selling AUD (a bit skewed to AUDUSD pair but that's expected from the Major).
All in all, it's a painful experience to see my trade went from profit to loss. What to do now depends on my upcoming analysis. I think the AUDCAD pair has to solely rely on CAD news release and again I think market will continue to strengthen into and a slightly long bias following Lowe's speak, I will exit this trade now and look for a purer CAD play.
So the recent impact from Lowe's speak on 5 Sep as well as the RBA's rate decision was generally not as Dovish as I thought as price bounced around during the rate decision than generally going up after a short break down after Lowe's speech. AUD actually reacted positively to both his remarks and the rate statement.
By default, if he doesn't change his view a lot from 5 Sep, market would react positively or even front running him into the speech. I totally missed this. Another item to be on my checklist: past reaction to the speaker's speech.
Another I find that I may be missing out on is a deeper analysis of the retail sentiment, again here I was too fixated on looking at only AUDCAD pair while this kind of analysis is better from the broader AUD view. I have taken a look across the AUD pair and find that actually most retail are also selling AUD (a bit skewed to AUDUSD pair but that's expected from the Major).
All in all, it's a painful experience to see my trade went from profit to loss. What to do now depends on my upcoming analysis. I think the AUDCAD pair has to solely rely on CAD news release and again I think market will continue to strengthen into and a slightly long bias following Lowe's speak, I will exit this trade now and look for a purer CAD play.
Thesis unchanged, though I think I'm a bit early trying to front run tomorrow CAD good news and AUD weakness. I don't think there will be a lot of volatility for this pair until then.