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Potential catalysts from China and Canada makes this textbook trend in AUD/CAD the play to watch for the session!

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Fresh Market Headlines & Economic data:

Upcoming Potential Catalysts on the Forex Calendar:

  • U.K. RICS Housing Survey at 12:01 am GMT (May 9)
  • Chinese CPI & PPI at 2:30 am GMT (May 9)
  • Japan consumer confidence at 6:00 am GMT (May 9)
  • Canada trade balance at 1:30 pm GMT (May 9)
  • U.S. PPI, trade balance & unemployment claims at 1:30 pm GMT (May 9)

What to Watch: AUD/CAD

AUD/CAD 1-Hour Forex Chart
AUD/CAD 1-Hour Forex Chart

A very like economic calendar for the next session of trade, but we do have Chinese CPI and Canadian trade balance data to potentially spark some volatility for AUD/CAD. Expectations for Chinese inflation are for a slight acceleration in price growth, which could mean a pop higher for the Australian dollar (often traded as a proxy for Chinese catalysts because of their trading relationship). Canada’s trade deficit with the world has been improving over the last couple of months, which could mean potential strength on Thursday.

Any situation outside of that scenario is likely to spark the most volatility, so if you’re a bull on AUD/CAD, you’ll wanna see strong Chinese inflation data and a weak read on Canadian trade.  If that occurs, then a break or a break-and-retest of the falling ‘highs’ pattern seen on the one hour chart above is likely the setups to watch out for a long signal.

If you’re bear trying to ride the trend lower, then a weak Chinese inflation update and positive Canadian trade update may give the best odds of the downtrend continuing. The pair is already testing the falling ‘highs’ pattern (and the Fibonacci retracement area), and it seems bears are already taking back control.

Using the daily ATR of around 50 pips as a stop, and the previous swing low as a target yields a potential 1:1ish return-on-risk, which is not bad for a potential one or two session trade. And since it’s with the trend, the probability is higher for a potential bigger return if it makes sense to ride it out.