Got My Eye on the AUD/CAD Falling Channel – Stopped at BE

Trade Closed: 2013-07-24 0:10

AUD/CAD Chart

Talk about rotten luck! After price dropped down to about the .9500 handle, I decided to move my stop loss to my entry point at .9595 just ahead of the weekend. While I did this as a precaution to avoid getting burned over the weekend, I honestly didn’t expect it to get hit since no big data was coming out at the start of this week.

Alas, Lady Luck had other plans for me! After consolidating for the better part of Monday, the pair spiked higher late in the New York session, stopping me out at my entry! Drats!

The Aussie has been stronger the past few trading days, as news that the PBOC would lower lending rates and the surge in gold prices have helped the currency from Down Under. This was rather unfortuanate for me, as the Loonie has been resilient as well, but just not as strong against the Australian dollar.

Stopped out at .9595: +0 pips / +0.0%

To be honest, I do think that the channel will continue to hold, so I’ll be keeping an eye out on this pair for the remainder of the week. If we see another test of the top of channel, I may just enter another short position!

Trade Update: 2013-07-18 02:07

AUD/CAD Chart

As expected, BOC Governor Stephen Poloz didn’t announce any changes to monetary policy for the Bank of Canada, as rates remained steady at 1.00%. Interesting to note though was the accompanying statement, which pretty much downgraded its global, U.S., and Chinese growth forecasts, but INCREASED it for Canada’s economy from 1.5% to 1.8%.

In any case, we did see a slight bump higher on AUD/CAD, with the pair spiking up to about the .9650 area. While I was watching price action, I thought that this might be a sign of a break of the falling channel.

Alas, that didn’t last long, as the CAD bulls came charging back! Tweezer tops formed on the 1-hour chart, and price crashed back down to the .9600 handle. With the falling resistance line holding nicely and with long-term fundies favoring the Canadian economy, I figured I might as well test my luck and go short at market!

Short at .9595, stop at .9710, profit target at .9400. Risking 0.50% of my account.

I’ve placed my stop just past the recent high and above the next major level, as I think a move up to those prices would clearly invalidate my trade idea. As for my profit target, I’ve set a realistic target at just above the previous low, at .9400. This leaves me with a roughly 1.9:1 reward-to-risk ratio, which is pretty awesome.

Looking ahead, the only red flag headed my way is the core CPI due tomorrow, but I have a feeling that this will show that inflation is muted and the markets won’t react too violently.

Good luck to everyone who took the plunge and jumped in short!

Trade Idea: 2013-07-17 01:07

Feast your eyes on this chart, homies!

AUD/CAD Chart

Not only do we have a clear descending channel on AUD/CAD, but Stochastic is deep in overbought territory and is showing a bearish divergence. As far as technical analysis goes, this setup’s a beaut and makes a very strong argument for a short.

But the fundamental side of this trade is where it gets interesting.

The Aussie has been finding support ever since the RBA meeting minutes indicated that the central bank isn’t itching to cut rates, so now might not exactly be the best time to sell the high-yielding comdoll.

Meanwhile, the Bank of Canada is set to hold its rate statement with Poloz at the helm for the first time later tonight. Many expect him to start his term with a bang, possibly by pushing back rate hike expectations. While no changes are expected to be made, we’ve seen more bad data than good since the last rate statement, so chances are that the BOC will take a more cautious tone with today’s announcement.

So what do you do when your technical analysis tells you to do one thing and your fundamental analysis tells you to be cautious? You wait it out!

That’s right, fellas. I plan to wait until the dust has settled after the BOC statement before I enter this trade, knowing fully well that the event could serve as a catalyst for a major bounce or breakout on AUD/CAD.

As sexy and tempting as the setup looks, I just don’t think it’s wise to jump in right before a potentially explosive event. At least by waiting, I have the option to either go long or short.

So what do you guys think? Are you watching this pair as well?