Kay Van-Petersen
Kay Van-Petersen, macro strategist at Saxo Capital Markets, digests the market action seen in week 43 and gives his tactical positing. Van-Petersen favours a USD step back, sees gold consolidating, and believes that European equities are overheated.
Short term
Trade view / 25 May 2016 at 13:19 GMT

AUDCAD still on the skids

FX Consultant / IFXA Ltd

The intraday AUDCAD downtrend from April took a time out over the past two weeks. The mild uptrend that started from the 0.9357 low came to an end on Monday with the move below 0.9450. The ensuing AUDCAD decline was shallow and the pair has been consolidating within a narrow range.

That is due to change.

Last week’s Reserve Bank of Australia minutes didn’t offer much in the way of a clue for future interest-rate direction. However, the downgrade of inflation forecasts keeps rate cut hopes alive which contrasts with the prospect for the US Federal Reserve.

Meanwhile, the recovery in oil prices has sheltered the Canadian dollar (to a degree) from the negative prospects arising from a hawkish Fed. Today’s Bank of Canada interest-rate statement (no press conference) should have minimal negative effect on the loonie.

The combination of bearish AUDCAD technicals and high oil prices sheltering the Canadian dollar should see AUDCAD revisit and possibly break the low seen in May.

Management and risk description

This trade idea could be stopped out quickly if the BoC statement is deemed to be “extra” dovish, implying a Canadian rate cut is a possibility. It is vulnerable to a drop in WTI prices as well. 

The other major issue is that AUDCAD is hovering around the 38.2% Fibonacci retracement level of the entire 2008-2012 range which could prove sticky.


Entry: sell ½ position of AUDCAD at market (currently 0.9445), balance 0.9485.

Stop: 0.9554 bid.

Target: 0.9355.

Time horizon: five days.

AUDCAD 30 minute (second sell level and break of intraday uptrend noted):

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Source: Saxo Bank

AUDCAD four-hour with downtrends and stop loss highlighted:
Source: Saxo Bank

AUDCAD five-year daily with moving averages:
Source: Saxo Bank

— Edited by Michael McKenna

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Non-independent investment research disclaimer applies. Read more
25 May
Michael O'Neill Michael O'Neill
UPDATE: This trade was expected to have a shelf-life of about 5 days. It was more like 8 hours. The strong rally in oil prices combined with a netural Bank of Canada has driven USDCAD to just above major support in the 1.2990-1.3000 level, while AUDUSD has remained flat.

We are within .0020 points of the target which was achieved quickly. Close the position at the market (Currently 0.9365 and book a gain of 0.0080 points

Note the second sell level was not executed.
25 May
Estuardorlemus Estuardorlemus
Thanks for the update Michael, Good trade and analysis on this one. Have a good day.


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