Trade of the week: long USD/CAD

(Partial video transcript)

Previous trades of the weeks

Chris Beauchamp: Hello and welcome to "Trade of the week" for Monday the 1st of September. Let's look back before we go into this week's trade. Axel specifically mentioned this to me on Friday, and you can understand why. Because his trade last week was to go long Palladium with a target of, he said, $1190.00 and the stop loss at $1094.00. And this looks like a great one. It seems to work out really, really well. 

This is the kind of chart that really appeals to me at the moment, because you can see how you've got to shift this in trend really. You've got Palladium with a really, really strong rally to start with, and a lovely pullback as well. And then it started to see the signs of a recovery. It did drop through these lows from July. But it has started to recover once again. So, that's a positive sign as well on the price basis.

But the fact that you've got moving averages moving higher and I know Axel's not a fan of them beause he doesn't use moving averages. But nonetheless, it's no bad thing to have them moving higher. The price supported as well, and MACD crossover. There's plenty to like about this. And so far it appears to be behaving itself.

Of course, it's the price that matters. And you have had four days of gains since this "Trade of the week" was announced last week. So a very, very good start to the final few months of the year. And that helps to bump up the performance overall. So, that's palladium for last week's trade, which still seems to be working out very nicely.

This week's trading opportunity

On to this week, and it is payrolls week in the US. It might be Labor Day today when the US market's on holiday. But it is of course non-farm payrolls on Friday. And that is crucial because we're heading towards the September Fed meeting. We're still expecting see rate cuts. But you have seen this interesting recovery in USD/CAD over the past few months since those lows in June when I think a lot of the pessimism around the US dollar reached its height.

Since then, there's more talk of a rate cut. But it's interesting that the US dollar is beginning to show signs of recovery. So, for this week 's "Trade of the week" beginning Monday the 1st of September, we're going to go long USD/CAD You can see how if I zoom in on the chart, the price action was seeing buyers coming in around CAD1.3720 or so. So, I think what we should do is put a stop just below that at CAD1.3710. Just give it a bit more room to breathe. But you've already got signs of maybe a recovery here. So I stop down at CAD1.3710 with an initial target, perhaps up towards CAD1.3930.

And those highs, from just before Powell started speaking at Jackson Hole back on the 22nd of August, assuming that this recovery in the US dollar has further to go. And so if you look at things like positioning, look at, the speculative investors in the US dollar, they're still quite heavily short the dollar. So if you get a bit more strength here in the greenback, that could give it quite a bit of a nudge to the upside. I think a lot of the bearishness around the dollar seems to have run its course.

This week's trade in summary

So, that's the "Trade of the week" for Monday the 1st of September. We're going long USD/CAD with our stop at CAD1.3710.