Trade Invalidated: 2011-07-21 02:10
Apparently, the Aussie has some serious wounds that need licking as its still reeling from the RBA’s dovish monetary policy meeting minutes. To make matters worse, yesterday’s soft MI leading index and today’s dip in the NAB quarterly business confidence report confirms that, indeed, the economy may benefit from a rate cut or two.
In the meantime, I’m considering if AUD/CAD is worth buying, now that its testing a former support zone. But at the same time, I’m feeling anxious about buying the Aussie, especially since AUD/USD is at a critical resistance level. Maybe it’s best I focus my attention on other crosses for now. Any thoughts or setups on other crosses you’d like to share?
Trade Idea: 2011-07-20 03:06
As my homegirl Queen Cleopiptra has said, recently, the Reserve Bank of Australia and the Bank of Canada have expressed divergent views on their respective monetary policies.
Minutes of the latest RBA meeting revealed that RBA policy makers are leaning toward the side of caution, and will most likely not be raising interest rates any time soon. Some even see a rate cut on the horizon. It will most likely take a strong surge inflation before RBA Governor Glenn Stevens and the boys from the Land Down Under consider another rate hike.
Across the Pacific though, it seems that BOC officials have shifted their stance with regards to monetary policy, and could raise rates sooner rather than later. According to yesterday’s rate statement, the central bank wants to keep inflation in check and remains upbeat over the state of the Canadian economy!
This divergence in interest rate speculation seems to have taken its toll on AUD/CAD, which finally broke through a key support level. After ranging for the better part of the last few months, the pair finally broke through support around 1.0230. Now that the pair has retraced a bit, I think there’s a chance that this area could serve as a support-turned-resistance point.
Now, instead of jumping in right away, I’m going to wait for Stochastic to hit overbought conditions, and for price to test the 50.0% Fib level at around 1.0240. Bearish divergence already seems to be forming, and an entry point around that price level will give me an ideal reward-to-risk ratio.
I plan to put my stop above the 61.8% Fib level, at 1.0290, while I’m setting a modest profit target at the recent lows near 1.0150.
Again, here’s my game plan: