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How’s your trading week going, forex friends? I’ve been trying to keep up with the quick market moves these days but I figured I’d be better off sticking with longer-term setups such as this one on AUD/CAD.

As you can see from the pair’s daily forex chart below, price bounced off the .9400 major psychological support once more. This level has held as a floor since 2013 and might continue to keep losses in check.

AUD/CAD Daily Forex Chart
AUD/CAD Daily Forex Chart

Zooming into the pair’s 1-hour time frame shows additional confirmation that an uptrend might take place, as price just broke above the neckline of a double bottom formation, which is a classic reversal signal.

AUD/CAD 1-hour Forex Chart
AUD/CAD 1-hour Forex Chart

In terms of fundamentals, I’m seeing a few positive reports from the Australian economy lately, indicating that the Land Down Under may be turning a corner even before the RBA lowered interest rates in May. For one, its first quarter GDP came in stronger than expected at 1.1% versus expectations at 0.6% while the previous reading was upgraded from 0.6% to 0.7%.

Both the Q1 GDP and the latest trade balance reflected strong gains in the export sector, signaling a return in demand for Australia’s commodity products. This could be sustained in the coming months, especially since China’s official manufacturing PMI held steady at 50.1 to indicate a continuation of industry expansion and demand for raw materials.

Meanwhile, the Canadian dollar seems to be in a weak spot after crude oil turned from the $50/barrel level. The Loonie’s price action could now hinge on the outcome of the OPEC meeting, although it seems unlikely that the oil ministers could reach a decision on capping output levels anytime soon.

Here are my trade deets:

Long AUD/CAD at market (.9470) at 0.25% risk, stop loss at .9125, profit target at parity. I’m planning to add another 0.25% position on a test of the lower part of the support zone around .9200 or on stronger bullish momentum past the .9500 mark.

With this structure, I’m looking at a potential 1.5-to-1 R:R for my first position and at least a 2.6-to-1 R:R if any of my second entries are triggered. Make sure you look at our risk disclosure if you’re joining me on this one!

Cheers,

Happy time

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