News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.



Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events


Economic Calendar

Economic Calendar Events

Free Trading Guides
Please try again
Oil - US Crude
Wall Street
More View more
Real Time News
  • Traders in the Euro have a big decision to make this weekend: if EUR/USD hits 1.20, will it continue to advance, consolidate or fall back? Get your $EURUSD market update from @MartinSEssex here:
  • The bullish engulfing candle is one of the forex market's most clear-cut price action signals for reversals and continuation. Learn more about this price action trading signal here:
  • The bull flag pattern is a great pattern to add to a forex trader's technical arsenal. Explosive moves are often associated with the bull flag. Learn more about the bull flag pattern here:
  • Defensive stocks have proven critically important when navigating stock market volatility. Find out what are the most defensive stocks here:
  • Dollar Index has broken major uptrend support and risks accelerated losses into the December open. Get your $USD technical analysis from @MBForex here:
  • The MACD is an indicator that uses exponential moving averages (EMA) to determine trend strength along with entry points based on crossovers. Find out how you can use the MACD as a buy/sell signal here:
  • Support and resistance are the cornerstone of technical analysis, making it the foundation that you build your knowledge on. Build a stronger foundation here:
  • Struggling to define key levels? Floor-Trader Pivots assist traders in identifying areas in a chart where price is likely to approach and can be used to set appropriate targets, while effectively managing risk. Learn how to use this indicator here:
  • Cyclical and non-cyclical stocks can help diversify a trader’s equity portfolio. Get your guide to understanding these stocks here:
  • Beautifully put.
Long and Short Opportunities in AUD/CAD

Long and Short Opportunities in AUD/CAD

2013-11-19 00:35:00
Kaye Lee, Head Forex Trading Instructor

Talking Points:

  • Developing Downtrend on AUD/CAD Daily Chart
  • Short Set-up on 4-Hour Chart
  • Long Scalp Trades for the Short Term

AUDCAD is offering two trade possibilities as it begins to display a potential downtrend on the daily chart. A rising support line has been broken, but it is only now being retested. A declining channel is also potentially forming.

Guest Commentary: Beginnings of an AUD/CAD Daily Downtrend

Long_and_Short_Opportunities_in_AUDCAD_body_GuestCommentary_KayeLee_November18A_1.png, Long and Short Opportunities in AUD/CAD

An actual downtrend still has yet to be formed, however. The lower high and lower low formation is encouraging, but the untested broken uptrend line is an issue. Before price gets there, it will have to deal with resistance from the declining channel, as shown on the daily chart.

In looking at the four-hour chart below, which magnifies the declining line of resistance from the downwards channel, an estimated resistance zone has been obtained between 0.9840 and 0.9878.

There is a rising wedge pattern, but given the daily chart pattern, it is anticipated that the price may overshoot upwards out of the wedge into the resistance zone before turning around.

Guest Commentary: Key AUD/CAD Resistance Zone

Long_and_Short_Opportunities_in_AUDCAD_body_GuestCommentary_KayeLee_November18A_2.png, Long and Short Opportunities in AUD/CAD

Of course, as indicated on the daily chart, this resistance may not be able to overcome the magnetic power of an untested broken trend line. However, it is a valid area for taking nibbles at the short side.

Traders should be ready to take one or two tries on the short side on the hourly chart should price rally to this area and give short signals like pin bars, bearish engulfing patterns, or reversal divergence.

At the time of writing, the pattern is far from ready to be traded, and it may take some time to get there. However, a lower time frame may offer a more immediate trading opportunity.

The hourly chart below shows a pennant, or triangle pattern, following a declining move and the formation of a pole.

Using the Fibonacci expansion tool and estimating a breakout level from the end of the triangle, a break to the downside would have to deal with support from the 0.9771-0.9783 zone.

Guest Commentary: Potential AUD/CAD Buy Opportunity

Long_and_Short_Opportunities_in_AUDCAD_body_GuestCommentary_KayeLee_November18A_3.png, Long and Short Opportunities in AUD/CAD

For those who want to understand the reasoning behind this long-entry opportunity:

  1. A pole followed by a consolidation pattern (flag, pennant, etc.) is usually followed by a breakout in the same direction as the pole move, which, in this case, is down.
  2. That move is usually projected to be 61.8%, 100% or 161.8% of the original pole's move.
  3. However, in this case, that level would be a break of the larger rising wedge pattern, which suggests that price should not go too far before being pulled back up to retest the underside of the broken rising wedge.
  4. Thus, the 61.8% -100% levels form a reasonable zone in which to look for a long scalp set-up.
  5. This move has justified reward for risk because the potential of the move is to begin a longer-term swing upwards to trigger the hourly short trade described in the first half of this article.

Those who wish to prepare for the trading opportunity should be eyeing 15-minute-chart longs for this second set-up, which would be triggered especially by pin bars, although bullish engulfing patterns and reversal divergence would also be acceptable.

Keep in mind this is a countertrend trade, and so a large part of the position (up to 75%) should be taken out as defensively as possible at the first sign of trouble, with a small, longer-term component held just in case this trade runs a long way into profit. After all, the higher-time-frame short may fail as prices race up to retest the underside of the broken trend line on the daily chart.

In this transitioning AUDCAD market, the best response is to have a mindset and trading plan for both shorts and longs, as we’ve described here today.

By Kaye Lee, private fund trader and head trader consultant,

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