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.
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.
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!
Other Popular Articles:
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.