We’ve got a simple technical setup on AUD/CAD that could draw in traders to take action, especially as we get top tier economic updates from Australia very soon.
AUD/CAD Downside Breakout?
Today, I’m checking out AUD/CAD for a potential short-term trade as I think we could see some action in the Aussie with the upcoming employment update from Australia.
Expectations are for the employment data to worsen in July vs. June, and if so, this could add to recent pressure on the Aussie, which is already starting to see weakness as Australia gets hit with a second wave of coronavirus infections.
So, I’m bearish on the Aussie short-term, and I’ll make that play against the Loonie, which seems to be benefiting from recent strength in oil prices and a better-than-expected Canadian employment report last week.
From a price action perspective, on the four hour chart above of AUD/CAD, we can see the pair breaking below a strong trend higher/rising lows pattern. This could draw in technical sellers and if Australia’s data disappoints later, this could turn into a momentum move lower.
With that said, I’ll be scaling into a short position starting at market, and looking to add on a pullback around the strong are of interest (around 0.9550). My stop will be above the previous swing high, and my max target will be the next potential support area (June consolidation around 0.9300). Here’s what I’m doing:
Short half position AUD/CAD at market (0.9493), max stop at 0.9660 with 0.50% risk, max target at 0.9275
Short half position AUD/CAD at 0.9545, max stop at 0.9660 with 0.50% risk, max target at 0.9275
I’ll be risking only 1.00% of my account if both positions are triggered, with a 2:1 potential R:R. I may add to this position depending on what we see from this week’s data and news events. If the data and market reaction doesn’t play out as I hoped, then I may close the down the position/orders right away.
As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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