AUD/CAD: Will Parity Hold? – Trade Closed

Trade Closed: 2013-11-28 11:30

Sorry for the late update, ladies and gents! Got caught up with prepping our Thanksgiving dinner last week but now I’ve found time to give a rundown of how my AUD/CAD swing trade turned out.

audcad

I’ve been holding on to this trade for quite some time already and even though I didn’t do so well with my initial short attempt, I’m pretty happy with how I tried again! As I notated in the chart above, I tried to get in after the test of parity then added at a break of the .9900 support but my adjusted stop at .9950 was hit. Afterwards, I decided to play the retracements instead of the breakdowns and got a smoother ride down.

As I mentioned in my Twitter update, I decided to close before Thanksgiving, as it appeared that the pair was having trouble breaking below the .9600 major psychological level. After all, I did plan on playing it carefully once price hit that established support zone and I got quite a few comments warning me about a potential bounce from that area.

All in all, I got a decent win with this one, as I scraped a 1.5-to-1 return on risk for my second short attempt. Not bad, I suppose? ‘Til the next trade, fellas!

Trade Update: 2013-11-26 1:15

Just a quick update on this swing trade, ladies and gents! Since price keeps trending lower, I thought it would be safe to move my stop a tad below my latest entry level (.9850) and place it at the .9800 major psychological mark to lock in some pips.

However, I’m still open to adding yet another position and pressing my advantage. At the moment, the pair appears to be finding support around .9650 and might be ready to retrace to the .9700-.9750 area.

I’m keeping my bearish bias on this pair because, as Pip Diddy mentioned in his Asian session update, Goldman Sachs just gave a downbeat outlook for the Australian economy. Prior to that, RBA official Lowe was quoted saying that the Australian dollar is trading at historically high levels and that he wouldn’t rule out a central bank intervention just yet. Talk about more jawboning!

For now, I’m up by close to 1% on my open trade, effectively giving me a pretty decent 2:1 return-on-risk. Do you think it would be wise for me to add to my position or should I just play it safe from here?

Trade Update: 2013-11-15 00:05

I’m sure many of you are wondering whether my AUD/CAD short is still open… Well, it is! In fact, I’ve already decided to move my stop to entry (0.9900) now that price has moved roughly 150 pips in my favor.

audcad

The pair has quite a long way to go before reaching my first target at .9600 but it seems that the downward momentum is still strong. After all, with the recent disappointment over China’s 3rd plenum, traders might not be so eager to buy up the Australian dollar.

With that, I thought it might be a good idea to add to my short position and press my advantage again. As Big Pippin pointed out in his Chart Art, AUD/CAD could retrace to the 0.9850 area before resuming its selloff. Do you think it’ll still reach that entry area though?

Trade Update: 2013-11-07 1:05

Here’s a short but sweet update on my AUD/CAD short trade!

Unfortunately, my adjusted stop loss around .9950 was hit when risk appetite improved in yesterday’s trading sessions. As Pip Diddy mentioned in his revamped trading session updates, the combination of the strong performance in Asian equity markets and relatively better-than-expected data in the London session was enough to keep risk on.

However, fresh economic data from Canada and Australia convinced me that I should re-enter this trade and retain my short bias. After all, Canada printed a much better than expected Ivey PMI reading of 62.8 versus the estimate at 54.7. On the other hand, Australia just released a very weak jobs report that showed a mere 1.1K rise in hiring and an increase in its jobless rate.

With that, I decided to short again around .9900 with a stop loss safely above the previous highs. Do you think this pair will keep heading down though?

Trade Update: 2013-11-05 2:45

It looks like RBA Governor Stevens is at it again! In the RBA’s monetary policy statement today, Stevens mentioned that the Australian dollar is trading at uncomfortably high levels and that a depreciation might be needed to spur further growth in the country. Although policymakers decided to keep rates unchanged at 2.50% for now, Stevens cited that economic performance has been below trend and that it’s too early to tell whether the recent pickup can be sustained or not.

With that, I decided to press my advantage on this short AUD/CAD setup. After moving my stop a few pips below entry to lock in some profits, I added another short position on the pullback to the .9900 major psychological level. After all, this lines up with the Fibs on the 1-hour time frame. I’m seeing a bearish divergence with stochastic, too!

audcad

Do you think AUD/CAD will resume its downtrend within the day and possibly test its previous lows around .9850? Let me know if you think my decision to add was a good idea or a bad one!

Trade Update: 2013-10-30 1:45

So far, so good! Thanks to RBA Governor Glenn Stevens and the run in risk aversion, AUD/CAD is finally showing some downward momentum. You see, earlier this week, Stevens started talking about the negative impact of the Aussie’s appreciation on their economy. This was enough to send a lot of Aussie bulls scurrying away!

I am tempted to move my stop to entry at this point, but I reminded myself that my plan was to give the trade a wide enough breathing room until the pair tests the next support level around .9600. Do you think that’s too far away though?

At the moment, stochastic on the daily time frame just crossed down from the overbought region, showing that bears are in control. I’ll be keeping close tabs on what’s going on in Australia, Canada, and even China to figure out if I need to make any adjustments soon. I’ll keep y’all posted!

Trade Update: 2013-10-24 21:40

Here we go! After patiently waiting for confirmation signals, I finally decided that it’s time to hop in this AUD/CAD short trade.

On the 4-hour time frame, I saw a bearish divergence forming as price kept making higher highs while stochastic was showing lower highs. As I mentioned in my Twitter update also, I spotted a reversal candlestick on the daily chart, which led me to think that parity will hold as resistance.

audcadI was able to short at market at .9975 and I set my stop roughly 150 pips away in case price makes several tests of the 1.0000 mark in the next few days. As I mentioned in my trade idea, I am ultimately aiming for the .9200 handle but I plan to adjust my stop to entry once price gets halfway there, possibly around .9600.

One thing that worries me though is that Canada’s fundamentals aren’t looking very solid right now, as the BOC recently downgraded their growth forecasts. Meanwhile, Australia might have brighter prospects since China printed a stronger than expected HSBC flash manufacturing PMI.

However, the recent spike in Chinese money market rates could mean a period of low liquidity and potentially weaker growth for the Asian superpower. This could drag the Australian dollar down much later on, so I’m preparing to hold on to this swing setup for weeks.

What do you guys think? Any feedback would be appreciated!

Trade Idea: 2013-10-23 7:36

Now here’s a technical setup that’s too sweet to ignore! After months of rallying, AUD/CAD is testing resistance right at parity. This happens to be around the 50% Fibonacci retracement level on the daily time frame and is right smack in line with a former support area!

Stochastic has reached the overbought region but has yet to cross down, which shows that Aussie bears are still waiting to pounce. The question is, do fundamentals also line up with this short AUD/CAD setup?

audcad

Earlier today, we saw a wave of selling during the Asian session, as news of a Chinese debt write-off hit the airwaves. Apparently, several Chinese banks have decided to erase several bad debts off their balance sheets, prompting traders to worry that banks will be in for huge losses or potential default.

With that, we saw a drop in Asian equity indices and a rally for the lower-yielding yen, which is a classic sign of risk aversion. The Australian dollar also dipped lower, as the prospect of a default among large Chinese banks could eventually hurt demand for Australian raw material exports.

Of course I’m also gonna keep tabs on the BOC interest rate decision later today, as this could determine whether the Loonie will be able to rally or not.

I’m still waiting on a little more confirmation for this trade though, perhaps a sign of downward momentum if stochastic starts moving down or a reversal candlestick on the daily or weekly time frame.

I’ll just post a quick update on Facebook and Twitter if I jump in at market, all right? I plan to set my stop above the 61.8% Fib level, which should give the trade around 150 pips of breathing room. I’m aiming for the .9600 level as my first target and the .9200 handle as my next target.

So, what do you think of my trade idea? I know I’m kind of picking tops and bottoms here but I have a good feeling that parity will hold as resistance this time. Do you agree?

Happy time

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40 comments

  1. zzcmathe

    Hi Happy-Pip,
    For what it’s worth, a Gartley pattern EA I have been trying out on MT4 has also indicated a “One2One Bearish” pattern has occurred and a bearish move may occur. This comes up on the daily chart. I am just watching at the moment to confirm the accuracy of the EA

    Reply
    • Happy Pip Post author

      Ooh, interesting. Thanks for pointing that out! I’ve been waiting for more confirmation signals lately. Let me know if you’re shorting too!

      Reply
  2. ed

    Hello Happypip,
    Did you take the entry on this pair?
    I was looking for a entry in this pais, I will see where I enter and post it.
    Happy trading
    Ed

    Reply
    • Happy Pip Post author

      Yep, I waited for confirmation and saw a doji/spinning top on the daily time frame. Jumped in at market around .9980. Did you short too?

      Reply
      • travis ninowsky

        nice trade….however,i would be careful at this point…my feeling the pair was quite overbought and is just working that off..on the daily chart there is a well defined channel and its nearing the bottom of it now..around .9800 give or take….my feeling Is that it will bounce somewhere in this area maybe abit lower yet and go back the top of its range around 1.0050…we will see….I wll say iam long and wish I wouldhave sold at the top there and shorted with you…but such is life …nice trade so far!!

        Reply
  3. FxSniper

    I don’t see how a short trade will work out properly under the circumstances described. Not with a firm doji bounce off 0.9950 that is yet to resolve. If anything, you should let the bullish pressure ease into the long term 0.61.8 retracement fib at 1.0122 area before considering any short. I should be long off current rates actually though I had no plans of doing anything on the pair. Another variable to consider is the nascent strength in AUD, which should not be taken for granted. Good luck if you short successfully.

    Reply
    • Happy Pip Post author

      Looks like it’s working out so far. I’ll be on my toes for any potential changes in sentiment though. Thanks for checking out my blog!

      Reply
      • FxSniper

        I am still maintaining a solid bullish bias on this pair and current level going into the weekend is a great spot for more buyers. I still believe strongly 1.0220 is the next swing target and nothing lower. Good luck on your short

        Reply
  4. Boiki Pheto

    In June I tried to long AUD/NZD at around 1.1800 thinking that it is oversold as the RSI was showing to be below 30, and I was aiming to sell at 1.2100 but it just went bearish up to 1.1300 where I lost almost all the money before I closed the order as I did not put stop loss. When I was reading your post I can see the situation is almost the same but yourself you are treading carefully.

    My question is where did I go wrong in that trade?

    Reply
    • Happy Pip Post author

      I think you should’ve set a stop loss to begin with! Even if technicals support a short trade, there’s always the chance that a sentiment change or economic releases could push the pair in a different direction from what you were expecting. Don’t forget to practice proper risk management by limiting your losses. Hope this helps!

      Reply
    • Happy Pip Post author

      I think the bounce you’re waiting for might happen once this one tests .9600. Seems to be nearing that support level right now.

      Reply
  5. Marion

    AUDCAD has been in a reversal channel since Oct 28 on the H4 chart making LH & LL. It’s bounced off resistance 3 times since the reversal began. It touched the Horizonal Resistance line and started down again this morning. I think there is room for the pair to break 0.9750 and shoot for 0.9600 & maybe more..

    Reply
    • FxSniper

      In my view, AUDCAD has put in a solid low price at 0.9720 and I don’t see pair moving below that figure anytime soon. Should it break, then my bias will definitely change but until then, I will be a strong buyer just as in AUDUSD. good luck on your short

      Reply
    • Happy Pip Post author

      Yeah, I’m watching that .9600 mid-range support very closely as well. I might just close most of my position here then leave a little part open in case it heads to the next support at .9200. Thanks for sharing your insights!

      Reply
    • Happy Pip Post author

      Testing .9600 at the moment and this seems to be a stubborn support zone. Time to book profits and run? Or leave a bit in case it breaks down?

      Reply
  6. Marion

    It’s correlated to the AUDUSD for substantially the same trend channel. The upper channel line is on with the 50SMA. RSI(28) & Slow MACD are also followiing the trend

    Reply
    • Happy Pip Post author

      Ooh nice! I see the technical indicators still line up for a short bias for now? Do keep me posted if you see signs of a potential reversal on those indicators you mentioned. Thanks for sharing your thoughts!

      Reply
      • sam goodman

        Hi happy pip,
        i have been trading considering the movements on RSI’s and SMA’a. i enter a trade especially when RSI is low, say 27.53 at the begging of a session and/or when RSI is high as at RSI 78.32 i consider it a sell-off! and i enter with an emediate order on which i expect the RSI to move on the opposite retracement of a certain trend.

        Is there any mistake that i do considering the RSI’s?

        Reply
  7. FxSniper

    My entries on AUDUSD are 0.9306 and 0.9370 (add).
    I shall be targeting 0.9750/0.9850/1.0220
    My weak stop is 0.9743 and depending on intraday volatility going into the weekend, I may still take it back down to 0.9276. I shall be using a lot of discretion on my stop on this one seeing that I have double position on the trade. I definitely will not risk below 0.9276

    Reply
    • Happy Pip Post author

      Did you buy this one again? It seems that this .9600 area is a very strong support zone. I’m playing my short carefully at this point, looking to just jump out if it makes a strong bounce and possibly switch to a bullish bias. Are you still strongly bullish on this pair?

      Reply
        • Happy Pip Post author

          Yep looks ready to bounce. That’s a solid area of interest. I’m sure plenty of traders were waiting to enter on that level. I’ll be booking most of my profits on this one then…

          Reply
          • FxSniper

            I hope you booked your profits before the bulls pounced. It was a great bounce and I am looking forward to a stronger move

          • Happy Pip Post author

            Well I did manage to lock in a bit since I have trailed my stop lower. Looks like it’s pushing down again in today’s trading.

  8. vasilis nouskalis

    Setup AUD CAD,waiting for S at 0.9750,ISL closed Daily above 0.9880,First target 0.9580,second 0.9500
    pic.twitter.com/WTXyNOGh3V

    Reply
    • Happy Pip Post author

      Thanks for sharing your trade plan! I’m waiting for a nice pullback to jump in again too. Keep me posted!

      Reply
  9. FxSniper

    AUDCAD has posted a seasonal reversal in my estimation and it does appear that bears will suffer more this time out. I am holding out on my long and taking the swap rate alongside. I will see how 0.9830 reacts to the bullish push

    Reply
    • Happy Pip Post author

      Interesting. What does a seasonal reversal mean? I don’t think I’ve ever encountered that term in my trading experience so I’m curious. I’m still watching this pair myself and considering taking a bullish bias, but depending on how Australian data and the RBA decision turn out.

      Reply
      • FxSniper

        Any currency pair moves flows and ebbs in cycles and at some point in the year, it dugs out either a high or a low that simply won’t budge because it has exhausted its moving range for that time period at that spot. That is what NZDUSD did at 0.81 and I see the same scenario at pairs like audcad and audchf. That is when you get ready for a better than usual reversal play or continuation depending on what the previous trend looks like. This price behavior is best observed on the bigger frames like Weekly and monthly.

        Reply
        • Happy Pip Post author

          Thank you so much for taking the time to explain this to me, I really appreciate it! I am trying to get in the habit of checking out those longer-term time frames instead of sticking mostly to 4-hour and 1-hour charts.

          Reply
          • FxSniper

            On ej and gj yes and indeed most risk crosses like euraud and co. I still believe GU should still go lower before recovery into the week.

          • FxSniper

            The sell off on the antipodeans, yes. No doubt, the bulls have suffered one setback after another these few days, but I will maintain longs for the time being while lowering slightly my overall targets.

  10. Pingback: AUD/CAD: Support Turned Resistance at Parity | Forex Blog: Playing with Comdolls

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