Daily U.S. Session Watchlist: AUD/CAD

AUD/CAD is seeing early action this week thanks to the Saudi attacks & broad risk aversion reaction to the weekend’s events. Coupled with upcoming economic updates from both Australian and Canada, this pair could be setting up opportunities for both the bulls and bears this week.

Intermarket Snapshot

Fresh Market Headlines & Economic Data:

• Wall Street set to open lower after Saudi attacks; energy stocks surge
• OPEC Chief Barkindo says ‘no need to panic’ after biggest-ever disruption to global production
• N.Y. Fed ‘Empire State’ business index falls in September
• Foreign investors reduced their holdings of Canadian securities by $1.2B in July, the 4th decline in 5 months
• Global services trade slows but stronger than goods: WTO
• China industrial output, retail sales fall short of expectations
• China’s property investment growth at four-month high in August
• Brexit talks with EU to intensify, PM Johnson rules out exit delay
• UK employers cut growth forecasts as Brexit, global slowdown weigh
• Divergent ECB views on stimulus moves a natural thing: Lane
• Lagarde will probably keep ECB stimulus going, Stournaras says
• Australia’s property recovery remains in-house as rest of economy struggles to motor on
• The BusinessNZ Performance of Services Index in New Zealand: 54.6 in Aug. 2019, compared to a revised 54.8 previous month

Upcoming Potential Catalysts on the Forex Calendar:

• New Zealand Consumer sentiment at 10:00 pm GMT
• RBA Monetary Policy meeting minutes at 2:30 am GMT (Sept. 17)
• Australia House prices at 2:30 am GMT (Sept. 17)
• ZEW Economic sentiment at 10:00 am GMT (Sept. 17)
• Canadian Manufacturing sales at 1:30 pm GMT (Sept. 17)
• U.S. Industrial production & capacity utilization at 2:15 pm GMT (Sept. 17)

What to Watch: AUD/CAD

AUD/CAD is on the move today, gapping lower on the open to 0.9075 from Friday’s close of 0.9141, on both Loonie strength from the spike in oil prices and risk aversion sentiment likely pushing down the Aussie dollar. We actually saw the gap close during the morning European session, but the bears on the pair quickly jumped on that opportunity to short AUD/CAD once again for quick pips going into the U.S. session.

Going forward, volatility could stay up on AUD/CAD as we will likely continue to see further developments on the Saudi attacks, and we may even get help from upcoming economic updates from both Canada (manufacturing sales) and Australia (RBA meeting minutes & home prices). So, depending on how those economic updates pan out, we could see several types of setups for both the bulls and the bears.

If you’re a bear on this pair, there are a couple of technical setups to watch if the market environment stays risk averse and bullish on oil prices. Strong resistance has formed around the 0.9125 area today (top of the gap) and a retest there could likely draw in sellers once again. We’ve also got to watch the higher ‘lows’ pattern and broken resistance area (0.9050 – 0.9100). A break lower there would likely draw in momentum sellers in this environment, and the potential R:R would be attractive if using the daily ATR (around 55 pips) and the previous swing lows (around 0.8925) as your exit guides.

If you’re a bull on this pair, the short-term trend higher is in your favor and this pullback lower could be a fresh buying opportunity. If risk aversion sentiment fades and the Australian data comes out positive, then a break above today’s highs is your cue to start working on a long position plan (e.g., momentum buy or break-and-retest strategies). The next potential resistance area isn’t likely until the July 2019 highs (around  0.9245), so if using the daily ATR as a stop guide, then the potential return-on-risk of a swing trade looks very attractive.