Partner Center Find a Broker

With a couple of major data points coming up from Canada later in the week, I’m looking at this potential short Loonie play on AUD/CAD.

Long AUD/CAD Idea

This pair has been trading sideways for the past few months, finding support around .8900 and resistance around the .9100 handle. Price recently got rejected at the top of the range and is making its way back down to the bottom.

Stochastic is still pointing down to indicate that sellers might have enough energy to take price back to support, especially since the area of interest at the middle of the range was breached.

AUD/CAD 4-hour Forex Chart
AUD/CAD 4-hour Forex Chart

Although the Aussie has been in a bearish mood lately, given the dovish RBA minutes, downbeat Chinese data, and trade war uncertainty, I’m also anticipating a Loonie selloff if the Canadian reports disappoint.

Canada is scheduled to release its CPI and retail sales figures later in the week, and weak results could be enough to finally convince the BOC to cut rates.

You see, the Canadian central bank is one of the few remaining major central banks to refrain from easing… so far.

Besides, crude oil is also taking a hit from trade-related tensions since it is one of the commodities included in China’s targeted list for retaliatory measures. With that, the oil-related Loonie is also under heavy pressure.

AUD/CAD Volatility from MarketMilk
AUD/CAD Volatility from MarketMilk

Checking the volatility of AUD/CAD shows that the pair has a daily average of close to 50 pips and that Thursday is its most volatile day.

This might be enough to take the pair down to the bottom of the range and, if I decide to go long right there on data misses, I’ll set a stop of 60-70 pips to weather this volatility.

What do you guys think?

 

Happy

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.