Trading the Bank of Canada interest rate announcement can be tricky because it can always go against you. Today’s rate announcement was anticipated (holding at 1.25%) which is normally bad for the currency (think weakness). However, all technical indicators pointed to a drop.
Trading the Bank of Canada Interest Rate
While the BOC held interest rates as anticipated, the USDCAD dropped dramatically. Here are the charts immediately preceding the announcement:
Notice the 15-minute was oversold and the 30 minute was at the ATR. The 240-minute had indicated trend divergence on both the Stochastics and ADX. Plus, buyers abandoned the move. Analyzing all of the above, I opted for a short spread for 9-11 am.
As shown on the spread, my risk per contract was $15 and within minutes price was down to 1.2923 (currently at 1.2890). The Nadex spreads allow traders to trade these high volatility reports using limited risk.
Why did the USDCAD move down after the Bank of Canada Interest Rate announcement? It could be because most economists predict a July 2018 rate increase is imminent. Then again it could be simply because the market was overextended on multiple timeframes. Either way, the Nadex spreads allow traders to take advantage of technical analysis patterns without risking a lot of capital.