1/22/2014 BOC Rate Statement / Overnight Rate (1000 EST)
Forecast: 1.00%
Actual: 1.00%
Previous Revision: n/a
TRAP TRADE (DOWNWARD FAN)
Anchor Point @ 0.9101
—————-
Trap Trade:
)))1st peak @ 0.9066 – 1000:00 (1 min)
)))-35 ticks
)))Reversal to 0.9098 – 1000:10 (1 min)
)))32 ticks
)))Pullback to 0.9076 – 1000:16 (1 min)
)))-22 ticks
)))Reversal to 0.9096 – 1000:53 (1 min)
)))20 ticks
)))Pullback to 0.9075 – 1001:17 (2 min)
)))-21 ticks
—————-
Final Peak @ 0.9017 – 1148 (108 min)
84 ticks
Trap Trade Bracket setup:
Long entry – between 0.9073 and .9069 (in between the S1 and S2 Mid Pivots)
Short entry – 0.9128 (just above the R2 Pivot )
Notes: The BOC left interest rates unchanged as expected citing trying to balance the risks of disinflation and inflation. This matched the forecast of leaving the rate unchanged, and caused a downward FAN in the long term that started out with large swings that catered well to the Trap Trade. The initial reaction fell 35 ticks to hit the S2 Mid Pivot, then retreated nearly to the origin 10 sec later. This would have filled the long entry with about 3-7 ticks to spare, then given you an opportunity to exit around 0.9095 with 20+ ticks when it reversed up to the PP Pivot. It continued to repeat another 20 tick cycle, before eventually settling into a bearish move. When that becomes obvious. it would be safe to sell the reversals when it approaches the 13/20 SMAs. It achieved a total of 84 ticks in just under 2 hrs as it crossed the S3 Pivot, and never achieved more than a handful of ticks on an attempted reversal.