AUD/CAD set to extend 2012 gains over 1.0765
The AUD/CAD continues to launch into the first quarter of 2012 by continuing its established uptrend. From the January 5th low at 1.0420, the pair has moved upward 345 pips to the Feb 8th high at 1.0765. As the pair moves higher, trend traders can look for swings back to an established trendline to formulate new positions.
Fundamentally, both the AUD and CAD have individually done well when compared against the USD. However, when paired against each other, the AUD has dominated due to their 4.25% Central Banking Rate. This rate was confirmed on the Economic Calendar Tuesday with a meeting of the Reserve Bank of Australia. As money consistently looks for the highest rate of return, money is expected to continue to flow into the AUD and away from the lower yielding CAD (1.00%).
Taking Price in to a 4Hour chart we can better see the AUD/CAD move up its trend line. One way we can spot possible entrys in an uptrend is by utilizing a Fibonacci retracement. The key is to draw our fibline from the last trend line touch up to our previous high. From here, we want to find where the trend line and fib retracements intersect for our entry. Below we can see a confluence of support near 1.0714.
My preference is to buy the AUD/CAD at support near 1.0715. Stops should be placed under support near 1.0675. First targets should be set on 1.0785 for a clear 1:2 Risk / Reward level. Secondary targets may focus on 1.0825
Alternative scenarios include price breaking support and trading to lower lows.
---Written by Walker England, Trading Instructor
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DailyFX provides forex news on the economic reports and political events that influence the currency market. Learn currency trading with a free practice account and charts from FXCM.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.