When Mars hit Earth

USD/CAD, 1 min chart

I aways think that USD/CAD is the most untradable currency pair for news trading. The reason is simple, most Canadian economic data will be released at 8:30 ET when U.S. economic data is also released. Then the movement of USD/CAD after 8:30 ET can be very complex. Even we suppose USD or CAD will respond positively and linearly to the difference between actual data and consensus, we still have 4 combinations of aftermath -- USD+/CAD+, USD+/CAD-, USD-/CAD+, USD-/CAD-. Only when USD and CAD have contrary movement direction, trader can hold his position and let the profit run a little long distance. If we relax the restriction on hypothetic conditions and suppose either currency responds nonlinearly, we will find it is extremely hard to trade USD/CAD in short-term after 8:30 ET, much much harder than trade EUR/USD, GBP/USD, etc., where only USD responds to new economic data.

Well, today we saw a dramatic movement after 8:30 ET of USD/CAD, when U.S. got a very bad trade balance, actual $60.3B to consensus $54B and previous $55.5B, on the other hand Canada got a very good trade balance, actual C$7.3B to consensus C$4.5B and previous C$4.4B. That was I called Mars hit Earth! USD/CAD fell 170 pips within 3 minutes!

When we trade currency, we prefer to buy the strongest and sell the weakest. There are many factors can make a currency strong or weak in short-term, for example friction around key support level or resistance level. In the news front, no other pair can compete with USD/CAD in short-term because of the 8:30 ET effect. However, we need not only analysis and preparation, but also LUCK to make money by trading USD/CAD (loonie) in short-term. In addition, there is a technical difficulty. When all news providers pour their real time reports on U.S. economic data at 8:30 ET, Canadian data may be late in 1 minute. Since Canadian is not so important as American, he can hardly be the first one in a queue.