Reversal alert! This pair busted through that long-term descending channel to show that it’s ready for a climb. I spotted this opportunity to catch a quick correction.
Long AUD/CAD Idea
Early this year, AUD/CAD finally made an upside break from its downtrend channel that had actually been holding since March 2017. It must’ve taken a lot of bullish energy to trigger that move!
Because of that, I’m thinking Aussie bulls could keep the charge going from here, allowing price to stay above the new ascending trend line that’s just forming.
Applying the Fibonacci retracement tool on the latest swing low and high shows that the correction levels span a pretty wide area of interest, from the broken channel resistance up to a former upside barrier around .9900.
I haven’t made up my mind on an exact entry level just yet since I’m keeping a lookout for when stochastic would hit oversold levels and turn back up. For now, I’m watching the .9825-.9900 region and would probably place my stop below the .9800 handle if I do hop in.
The tide seems to be turning against crude oil from here, possibly dragging the positively-correlated Loonie later on. Both the API and EIA seem to have capped off their streak of inventory draws, allowing oversupply fears to resurface.
Then again, the Loonie hasn’t been exactly moving in tandem with the commodity from time to time, leading me to think that it could still be strongly tied with Canadian fundamentals. Either that or the NAFTA talks could be the main driver of CAD price action in the next few days.
However, the Aussie could put up a strong fight, especially since data from China has continued to impress. This signals sustained demand for Australia’s commodity products, particularly iron ore. To top it off, jobs data from the Land Down Under has been very upbeat for December, hinting at stronger domestic consumption down the line.
All in all, while the techs are looking pretty neat, I think I’m gonna hold out for more confirmation with this setup. Apart from waiting for reversal candlesticks to form around the entry zone, I’ll also keep close tabs on headlines to gauge if the uptrend could carry on. Care to weigh in?
See also: Q4 2017 Trading Performance Review
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