Earlier this week I highlighted the Canadian Dollar, and reckoned it was well on the way to parity with the Greenback.

At the time the rate was threatening to break C$1.01, but with an oversold RSI of 27 I was prepared to wait for a pullback to test resistance at C$1.02. Since then the price ventured below C$1.01 but was unable to hold a daily close there, and subsequently rallied to within spitting distance of my entry target.

Canadian CPI and retail sales data were due out today, but my view was that unless these numbers were a disaster they wouldn’t get in the way of a strong trend.

Strategy
My focus here was on the C$1.02 big figure. This had acted as major support in recent months so I expected it now to be a good line of resistance. I was looking to go short as close to that level as possible so scrolled down to a 10-minute chart for early signs of a reversal.

During the morning the price was unable to better its early high of C$1.0187 so on the third failed attempt I sold £5 at C$1.0180. This move had a weak confirmation from the MACD, but without a break on the RSI or the moving average I was putting my faith in the C$1.02 resistance line. As I had outstanding bets on FTSE, the Dax and a couple of equities I was happy to run a smaller bet on this trade.

Where To Place Stop And Limit Orders
I placed my stop loss at C$1.0210, far enough above the resistance line to avoid the odd dodgy spike. On my £5 bet size this meant that my potential loss was limited to £150, a reasonable risk for trading ahead of economic data.

My ultimate target was parity, but I was happy to take some money off the table before that. I saw C$1.01 as a possible support level so set an order to close out £2 at C$1.0105. With a guaranteed profit I would then run the balance with a trailing stop loss to target parity.

Outcome
The price was already falling ahead of the Canadian CPI numbers, giving me a buffer in case the numbers were weaker than expected. As it was, the inflation data came out above expectations with the core number a whopping 0.4% higher.

The price plunged; briefly dropping below C$1.01, hitting my first target at C$1.0105. The price then consolidated just above the figure until further nerves hit the price ahead of the lunchtime retail sales data. Once again the numbers were much stronger than the market expected, pushing the rate down to C$1.0060.

I closed out a further £1 at C$1.0080 when the second green candle confirmed a temporary bottom. My trailing stop loss at C$1.0130 has just been hit, closing me out for an overall profit of £350 on a trade with a risk of £150.

Looking at the strong reversal this afternoon I was wrong to target parity today, but careful planning still gave me a profitable trade to end the week.

Have a good weekend and enjoy the rugby