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AUD/CAD has gone my way so far, but with an likely volatile week ahead for both AUD and CAD, it’s time to look ahead and come up with a plan to both maximize the trade and reduce risk.

Trade Update: AUD/CAD Resistance Held on Retest

AUD/CAD 4-Hour Forex Chart
AUD/CAD 4-Hour Forex Chart

Back in mid-January, I sold AUD/CAD at market to play my fundamental bias favoring the Loonie over the Aussie. It’s been mostly a slow grind lower, but I feel like it’s time to make some moves with the market consolidating and probably ready to make a new leg lower.

This thought is based mostly from a technical perspective as we’re seeing a descending triangle form around the 0.9400 area, which is typically a bearish chart pattern. A break below the bottom of the triangle could draw in technical sellers.

Fundamentally, I think there’s definitely a chance for volatility to pick up in AUD/CAD through next week, first with some top tier Aussie events through Wednesday, then some Canadian data on Friday.

The most notable event for potential movement is the quarterly Australian employment report, and right now it’s a tough call with Australian PMIs showing job expansion in the Services and Manufacturing sectors, but contraction of jobs in the Construction sector. It should also be noted too that the employment component of the services and construction PMIs already show contractionary conditions. It’s really a toss up so I’m going to have to react rather than position ahead of the event.  And next Friday, Canadian retail sales could be a price action driver, and with the trend of weakness in this data point, I may have to adjust before the data releases depending on what the expectations are by then.

With that, I’ll be in defensive mode next week on this trade, but I am looking to add to my short position and roll down stop if we do get weak employment data from Australia and a break of the descending triangle.  If these conditions don’t play out, I’ll look to reduce my risk (roll down stop and/or reduce/close position) ahead of the CA retail sales data depending on the price action. So stay tuned for that and as always, good luck and good trading!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.