This is one of my rare "long term" trading plan (1 week is long term for me, 2 weeks is torture!.. 3 weeks? get the fudge out of here!). This is a plan the revolve around the Bank of Canada monetary policy. BOE is tightening, Federal Reserve is tightening, ECB have tapered their QE programme hence they will eventually tightening.. BOC, after several positive data on growth and the labor market, trade balance (though Retail Sales was poor early November) are expected to make a statement that tightening their policy should be a inevitable. Market is expecting BOC will hold the rates for now but as I said earlier, they are expected to make a hawkish statement later.
I also suspecting the market is buying CAD into this event (infact since Friday). Any dovish statement from BOC later, will fuel CAD selloff but this plan is for a hawkish BOC statement later.
Risks for this trade :
Next week FOMC meeting which could drive EVERY USD pairs on dollar strength (Long USDCAD). Some might argue USDCAD isn't the best pair to trade this. CADJPY should be a better trade as it provides a very divergent policies. (Yes, I wil be making three trading plans for CAD. USDCAD, GBPCAD and CADJPY)
I also suspecting the market is buying CAD into this event (infact since Friday). Any dovish statement from BOC later, will fuel CAD selloff but this plan is for a hawkish BOC statement later.
Risks for this trade :
Next week FOMC meeting which could drive EVERY USD pairs on dollar strength (Long USDCAD). Some might argue USDCAD isn't the best pair to trade this. CADJPY should be a better trade as it provides a very divergent policies. (Yes, I wil be making three trading plans for CAD. USDCAD, GBPCAD and CADJPY)