The Weekly Update: Canada Elections Side Effects on the CAD

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The CAD and the Canadian Elections

The Canadian elections are due to take place tomorrow (Monday), 19 October, 2015.  While some suggest the general elections in Canada are unlikely to impact the Canadian Dollar (CAD) we have noted the possibility for a weak CAD in the Forex market. The battle between Stephen Harper, the current Prime Minister (PM) and Justin Trudeau from the Liberal party has gained much attraction in Canada with a possible win to Thomas Mulcair from the New Democrats party. We suspect what ma trigger a CAD weakness in the market is a hung parliament, which spills uncertainty and has the tendency to weaken the currency in the Forex market.

CAD Technical Analysis

We analysed USDCAD, EURCAD and AUDCAD. The entries for USDCAD and EURCAD are restricted to the hourly charts while AUDCAD is supported by the daily chart. With that being said, trading AUDCAD exposes us  to the upcoming China Gross Domestic Product (GDP) that is due to be released during the Asian session.

USDCAD 60min Chart

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EURCAD 60min Chart

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AUDCAD Daily Chart

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CAD Trading Strategy

USDCAD reversed Head-And-Shoulders (H&S) is clearly noted on the hourly chart. The protective stop can be placed below 1.2900 or below the support (in black). The take profit is approximately +120 pips, which is inline with intraday analysis. Overall it is a fair entry but it may require constant monitoring. as this is a 60min chart.

EURCAD has painted a potential right-hand shoulder (reversed H&S), nearest support is noted at 1.4648. The neckline is highlighted in black while the latter support is seen at 1.4607. The third wave has been exhausted which may suggest the fourth may encounter difficulties in materialising.  Similar to USDCAD, as this is a 60min chart the trade may require constant monitoring.

AUDCAD daily entry indicates the established uptrend where the recent dip was contained at 0.9377. The target is approximately +280 pips, which is significantly higher than EURCAD and USDCAD. The size of the stop is relatively tight when compared to other CAD crosses as well but it comes at the cost of exposing ourselves to China GDP due to the Australian Dollar (AUD).

At the time of this writing we are uncertain which currency pair to opt for. We are unlikely to opt for all three currency pairs we would like to control our market exposure. Our preference is AUDCAD but if China GDP disappoints the protective stop will be triggered by the market, which is one of the factors we must bear in mind should we target AUDCAD.

The estimated duration for all trades is not more than 5 days but the next 48 hours will probably determine the upcoming trend of the Canadian Dollar. We will email the trade alert’s details via an email after 21:00 GMT with the currency pair we have chosen.

EURCAD Trade Alert Details

We have decided to opt for EURCAD as it also supports our projections for the ECB monetary policy this week. We are using a relatively tight stop as this is an intraday entry.

Please click on the chart to enlarge:

EURCAD long at market price (1.4658)
Take profit: 1.4810
Protective stop: 1.4607
Risk Ratio (RR):  1 : 3.3 (approx.)
Estimated duration: 5 days

19/10/15 UPDATE:  This is a rare modification we are doing to EURCAD long trade. We are modifying the protective stop from 1.4607 to 1.4603.

19/10/15 UPDATE II: EURCAD posted a low of 1.46069 before correcting higher. Although there are still many obstacles on the path to recovery our decision to modify the stop has been wise at the time of this writing. EURCAD is currently trading at 1.4624.

19/10/15 UPDATE III: EURCAD is trading at 1.4730 at the time of this writing.

Last Updated on October 25, 2015