Strategy: Short at 1.0441, Targeting 1.0281
We initially sold AUDCAD at 1.0619 as a way to gain exposure to relative Chinese versus US economic growth expectations – with the North American economy expected to accelerate this year as the East Asian giant slows – and booked profits on the position on June 6 at 1.0197 as prices took out falling channel resistance set from mid-March. We have attempted to re-enter the trade in June and July but in both instances the upward correction proved to have space to continue.
Positioning now appears attractive to attempt a short once again as prices break through support at the bottom of a Rising Wedge chart formation after completing a bearish Evening Star candlestick pattern. Negative RSI divergence reinforces the case for a downside scenario. We will sell the pair from here, initially targeting the 38.2% Fibonacci expansion at 1.0281. A stop-loss will be triggered on a daily close above 1.0598.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com
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