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Short Set-up Triggered in AUD/CAD

Short Set-up Triggered in AUD/CAD

2013-08-10 16:10:00
Raghee Horner, Technical Strategist
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Aussie strength coupled with Loonie weakness has caused the AUDCAD to run far and fast to the upside, but with the charts signaling exhaustion, a near-term short opportunity seems to be at hand.

The Australian dollar (AUD) has continued to strengthen versus the Canadian dollar (CAD), and Friday’s major miss in Canada’s employment change and tick lower in the unemployment rate has propelled the AUDCAD pair even higher.

The dominant trend here is the question: Does the Chinese trade balance and the Reserve Bank of Australia (RBA) omission of “scope for further easing” in the August statement change the trend for the AUD?

On the other side of the pair, how much more will struggling commodities exports and consumer growth weaken the loonie?

That’s the near-term outlook, but it comes in contrast to the third-quarter optimism that, even post-Fed taper, Canadian growth will rebound. So there’s a longer-term outlook that could be the fuel for more downside in this pair.

Guest Commentary: Daily Chart of AUD/CAD

Short_Setup_Triggered_in_AUDCAD_body_GuestCommentary_RHorner_August10A.png, Short Set-up Triggered in AUD/CAD

The downtrend in AUDCAD is established, but it’s both Aussie strength and loonie weakness that is creating the correction in the trend. As long as price remains below the 50-period displaced moving average (DMA), I will consider the trend/resistance intact.

The red candles are still dominating, so Friday’s blue (neutral) GRaB candle is not a concern as prices rally into the dynamic resistance of the 34-period exponential moving average (EMA) wave.

The five-minute chart below shows the speed of the 50+ pip move higher, which borders on the extreme of the hourly price movement for the pair. This is a fairly solid indication of an exhaustion point, and in the case of the daily AUDCAD swing short, it puts the move just a little above the conservative short entry at 0.9450.

Guest Commentary: Exhaustion Point for AUD/CAD

Short_Setup_Triggered_in_AUDCAD_body_GuestCommentary_RHorner_August10B.png, Short Set-up Triggered in AUD/CAD

By Raghee Horner of TradeForexFutures.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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