Good morning traders!
Overnight FED Chairman Jerome Powell outlined his most aggressive approach to taming inflation, potentially signalling two or more half-percentage rate hikes in the next FED meetings, with the first as early as May. “I would say that 50 basis points will be on the table for the May meeting,” Powell said at an IMF-hosted panel on Thursday in Washington that he shared with European Central Bank President Christine Lagarde and other officials. He also described the labour market as overheated and unsustainably hot.
Talk of a possible recession is becoming more evident. The Head of global economics at Bank of America Securities has stated “This is going to be a very close call on whether we get a recession or not,” furthermore “They have to get monetary policy into a tight territory, and they probably need to get some kind of rise in the unemployment rate”. These comments have come after the yield curve inversion a couple of weeks ago, which generally indicates a recession is approaching.
Fundamentally, this supports long trades on the USD, and the USDCAD appears to have set up a corrective pullback to buy into.
We are setting up a double position incase of another short term pull back in the market before the larger move to the upside – which has generally been the theme on the majority of our recent positions.
Trade Setup 1: BUY market execution, current price 1.2594, stop loss 1.2484 and take profit 1.2810.
Stop loss: 110 pips
Take profit: 216 pips
Trade Setup 2: BUY LIMIT – entry price 1.2520, stop loss 1.2480 and take profit 1.2810
Stop loss: 40 pips
Take profit: 270 pips