AUD/CAD Trend to Tests 1.0250 Support_Line
The AUD/CAD continues to trade higher since the break of the 1.0200 resistance level discussed in the, Chart of the Day, April 15th. Since this time, price has continued to trade as high as 1.0555 on May 5th of this year. From the low established on March 16th at .9606 the pair has moved a total of 949 pips from high to low on a yearly basis.
Both pairs are uniquely correlated to commodities. The AUD is directly correlated with crude and the CAD with oil. These relations can give us insight into the direction of the AUD/CAD. Currently global demand for oil has waned with concerns over Chinese growth and lingering fears over Greek default. Demand for Gold has remained brisk with fresh buying coming from retail consumers in India preparing for the upcoming Ramadan holiday. If these commodity trends continue, we can reasonably expect the trend in the AUD/CAD to remain the same as well.
Taking price in to an 8H chart, we can see support being formed at the 1.0250 level. Price is currently making its fifth attempt on this level, with each attempt failing to crack support. This allows trend traders opportunities to buy on bounces as long as price fails to create new lows.
My preference is to buy the AUD/CAD, staying with our established trend. Traders can look to buy the pair against current support near 1.0250. Stops should be placed at 1.0100 or better, risking only 150 pips. Limits should be set near the previous high at 1.0550, looking for 300 pips profit. This will establish a clear 1:2 Risk/Reward ratio for our trade.
Alternative scenarios include trading a break of support, with prices attempting to return to parity.
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