Remember that AUD/CAD break-and-retest forex setup I was watching a few weeks back? Well, it looks like the pair is still stuck right around the area of interest I pointed out! Do you think it’s worth hopping in a short trade from here?
As you can see from the chart below, the pair is still hovering around the 61.8% Fibonacci retracement level, which coincides with the .9500 major psychological mark and a former support area. To sweeten the deal, a bearish divergence has formed, with price making higher highs and stochastic drawing lower highs.
In terms of catalysts, we’ve got the Caixin manufacturing PMI from China coming up tomorrow and another bleak reading could remind traders that the world’s second largest economy is in the middle of a slowdown. If I remember correctly, this particular report was one of the main reasons why the Chinese equity market tumbled last month!
I’m just not quite sold on the oil price rebound just yet so I’m having second thoughts about buying the Loonie. While the OPEC hinted that they’re willing to cooperate, there hasn’t been any follow-through on this and it looks like they’re still maintaining their production levels. Then again, the BOC mentioned that the Canadian economy has drawn a lot of support from improving U.S. fundamentals so I think the Loonie might be on stronger footing compared to the Aussie, which is more sensitive to Chinese data.
For now, I’m thinking of waiting for a bit more momentum, possibly on a break below the nearby support at .9400-.9450. If I’m able to catch that move, I’ll set a stop above the .9550 level and aim for the previous lows near .9150. What do you think?
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