A pick up in volatility could be coming to AUD/CAD soon with Canadian inflation data ahead, making the pair one to watch as it sets up several different technical arguments.
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
|
DAX: 12854.09 -0.52% FTSE: 6068.06 -0.97% S&P 500: 3376.53 -0.16% DJIA: 27718.38 -0.46% |
US 10-YR: 0.67% -0.013 Bund 10-YR: -0.455% -0.004 UK 10-YR: 0.226% +0.008 JPN 10-YR: 0.037% +0.00 |
Oil: 42.26 -1.47% Gold: 1995.00 -0.18% Bitcoin: 1941.79 -3.32% Ethereum: 420.81 -3.26% |
Fresh Market Headlines & Economic Data:
S&P 500 turns negative after hitting intraday record high
Treasury Secretary Mnuchin says Democrats are unwilling to strike a ‘reasonable’ relief deal
U.S. housing starts total 1.496 million in July, vs 1.240 million expected
Brexit Talks Resume With Just Seven Weeks Left to Reach a Deal
Key Factors Driving Bitcoin’s 73% YTD Return
The $425 billion payment holiday question hanging over Europe’s banks
RBA Meeting Minutes: No need for further easing; downturn not as severe as expected
ANZ-Roy Morgan Australian weekly consumer confidence: 88.6 vs 86.5 previous
Economists at ANZ and ASB now see the Reserve Bank taking the Official Cash Rate negative next year
Reuters Tankan Index: Pandemic woes continue to hurt Japan business mood in August
Upcoming Potential Catalysts on the Economic Calendar
API Crude Oil stock change at 8:30 pm GMT
Japan Trade Balance, Machinery orders at 11:50 pm GMT
Australia Leading Index at 12:30 am GMT (Aug. 19)
U.K. Inflation rate at 6:00 am GMT (Aug. 19)
Euro area Current account at 8:00 am GMT (Aug. 19)
Euro area Inflation rate at 9:00 am GMT (Aug. 19)
Canada Inflation rate, Wholesale sales at 12:30 pm GMT (Aug. 19)
What to Watch: AUD/CAD
On the one-hour chart above of AUD/CAD, we can see the pair in consolidation mode but with a slight bullish lean as it forms a tight channel higher.
This chart pattern is occurring around the Fibonacci retracement area of the recent swing lower (from around 0.9640 down to 0.9440), and we can see a divergence forming between the price and Stochastic, signaling the potential for a reversal lower. So, will the bears take over here?
Right now, it looks like it with the big bearish candle just forming and broad risk sentiment flipping negative during the U.S. trading session. If risk sentiment continues to hold negative for the rest of the session, we could see a pullback from today’s broad Aussie strength. So, if you’re a bear on AUD/CAD, then a break below the tight channel is the signal to start considering a short position, especially if we see better-than-expected inflation data tomorrow.
An alternative short entry strategy would be to scale into a short position, starting with nibblers from current levels up to the 61% Fibonacci retracement area, effectively reducing the risk of missing a potential move lower and improving the potential return-on-risk.
For the bulls, you’ll likely have to wait for a catalyst to flip global risk sentiment to back to positive (e.g. U.S. stimulus deal reached, positive COVID-19 vaccine/therapy news, etc.), and/or a much weaker-than-expected Canadian inflation update.
In that scenario, a break above the 61% Fib level (around 0.9560) will likely draw in momentum buyers that may target the previous swing high (around 0.9640), which is a little bit outside of the daily ATR of around 70 pips.