The second wave is always real money. In this post from 2015, I describe how fast money is quick to move in markets, but that a second wave of buying always comes on game-changing news
USD/CAD fell hard on April after the Bank of Canada but continued the next day. Why? (Update: it would continue to fall for a month)
The two major participants in markets are traders and real money. When the news hits, traders are first to react and that was what we saw immediately after the decision as they began unloading USD/CAD because the BOC struck an optimistic tone.
Real money rarely makes split-second decisions. It has a longer-term view and in the case of USD/CAD, the thinking was that it would go higher as the Bank of Canada continued to cut rates. Those managers are the types to read the BOC decision, the MPR and watch the press conference and then mull over what to do next. They'll sleep on it and then make a plan the next day.
What real money is doing in USD/CAD
In January after the surprise BOC cut, they began making big moves, buying USD/CAD and planning to hold. Today, many of them changed plans and began to sell.
When you're trading it, that's the reason you need to know if news is really a game changer; if it really changes the path of interest rates. Those are the trades when it's okay to chase and then ride the wave. With the BOC, here's what I wrote seconds after the BOC decision.
"Not as dovish as some people were looking for...This sounds like the Bank of Canada isn't going to cut further. It's bad news for USD/CAD."
Then, 20 minute later.
"Everything in the BOC statement argues to sell... USD/CAD flows can be slow to materialize and I like the downside here, and much more if 1.2400/1.2350 gives way." (the market was at 1.2443 at the time).
Decisions like that are why I believe that fundamentals are the backbone of every good trade. And when the technicals aligned like they did so beautifully in USD/CAD; that's when it's time to bet big.
USDCAD daily
Now, USD/CAD is testing the 100-day moving average so it might be time to take a bit of profit (maybe half) but there isn't much support until 1.2050. Keep an eye on oil and look to sell a rebound to 1.2300/50.
(Update: USD/CAD fell to 1.2088 within 48 hours, bounced to 1.2306 and then fell to 1.1945)
