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:
- Trump says China’s vice premier is coming to the US ‘to make a deal’
- U.S. mortgage applications post biggest fall in four months: MBA
- China April exports unexpectedly fall but imports rebound as fresh U.S. tariffs loom
- Brexit delay boosts consumer spending reveals Barclaycard
- Theresa May: Conservative MPs to discuss PM’s departure date
- U.K. House prices ‘rebounded in April’
- German industrial production beats forecasts
- ECB’s Draghi Sees Wage Pressure, Won’t Allow Defeat on Inflation
- Canadian housing starts jump 23 percent in April -CMHC
- New Zealand central bank cuts rates to record lows, signals another next year
- Bank of Japan board debated pros and cons of more easing at March meeting
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
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.