AUDCAD still on the skids
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.
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.
Entry: sell ½ position of AUDCAD at market (currently 0.9445), balance 0.9485.
Stop: 0.9554 bid.
Time horizon: five days.
AUDCAD 30 minute (second sell level and break of intraday uptrend noted):
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AUDCAD four-hour with downtrends and stop loss highlighted:
AUDCAD five-year daily with moving averages:
— Edited by Michael McKenna