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After breaking below a rising channel pattern, will AUD/CAD draw in more sellers to push the pair lower?

Channel Break Lower on AUD/CAD?

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

On the four hour chart above of AUD/CAD we can see the pair broke a rising channel pattern back in April, and after a retest of the rising ‘lows’ pattern, sellers jumped  in to push the pair lower in May. So, it looks like this fresh down move is not a fake out, but does it have legs to keep on going lower?

Looking forward, that could be determined by the several different factors. From the economic drivers angle, we’ve got employment updates from both Australia and Canada coming pretty quickly, and the Bank of Canada will have a monetary policy meeting at the end of May.

From a geopolitical and intermarket perspective, global risk sentiment has taken a turn lower thanks to the sudden change in expectations of the U.S.-China trade negotiations story earlier this week. Tomorrow is when we’ll see if Trump’s tariff threat will actually go live, and if it does, it may hit the Aussie more than the Loonie because of Australia’s close ties with China. And oil has been pretty influential on the Loonie lately, as usual, and with oil turning lower with risk sentiment the Canadian dollar may be just as hurt as the Aussie in the process.

So there’s a lot going on for AUD/CAD this month, which means increased odds of volatility rising for the pair, but the directional bias looks pretty uncertain at the moment. What I’m looking out for is if tomorrow’s Canadian employment update is positive, then it’s likely we’ll get a much less dovish BOC at the end of the month, which could be priced into the Loonie before hand. And if Aussie’s jobs numbers disappoint, then it’s likely there will continue to be pressure on the Aussie for a rate cut at the next RBA meeting.

If those two scenarios play out, along with the U.S.-China starting an all out trade war, then I’ll look to short AUD/CAD, preferably on a bounce and retest of the area between the broken channel and the minor psychological area around 0.9450 that’s already knocked the pair lower this week.

What do you guys think of this plan? Let me know in the comments section below!

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