Fundamentally, both sides of this pair are facing selling pressures on other confronting currencies because they are begged to commodity prices. Aussie is very correlated with gold and all mining commodities, while Canada is also correlated with gold and oil. For that reason we can see the choppy charts showing indecision between buyers and sellers on the fate of this pair. At the end of the day, the Aussie has been depreciating due to RBA interference by lowering interest rates, in addition to the mounting risks that China might spoil over the Australian economy, as China is the largest importer from Australia. On the other hand there has been recent speculation that prices of oil are going to recover from their record low level to show prices rise to $80/ barrel, which could give another boost to the CAD.
* Technical Highlights:
1- The pair reversed the bullish trend that is represented in the XABCD pattern in purple that was signing a trend reversal to the upside from the overall bearish trend represented in the weekly chart. It was signing a trend reversal, because the pair did show a higher low and traded above the 200 DMA.
2- This bullish sign on the XABCD pattern returned to be a false breakout, and prices continued pushing down, continuing the bearish trend. Trading below the 200 Daily moving average, giving us a bearish bias on this pair. Also the black trend line as well as the 200 DMA acted as a very good resistance point on this pair.
3- Prices fell to a critical point to reach the support of the C leg at 0.94 in December, 2014. Prices kept on trading water after failing to break below that critical level. Prices then shoot up to breach the 200 DMA adding to more confusion for traders. The trend line could not hold as a support and prices again failed to stay above the 200 daily moving average, sending prices to re-test the C leg of the butterfly pattern which was rejected several times.
4- At final, prices broke that area of support "0.94" after 9 months of consolidation, suggesting more bearish bias on this pair. Now the 200 DMA has left the role of being the mere resistance level, and the 100 DMA is taking control of playing as a resistance level, suggesting further bearish bias.
5- The pair fell to touch the 0.915 level or the A Leg of the butterfly pattern, before breaking this level prices re-tested the 100 DMA and are poised to fall again.
6- If prices break the A leg pattern support, we could see a steep downtrend heading towards the next round level of 0.9000 and then 0.8500.
How to trade?
I already took a short position on this pair @ 0.976 with 50% of my position is filled and the other 50% will be filled after I see a breakout and a re-test of the 0.9158 support. I usually divide my position into two, the first position is to test the market and usually is the riskier one, while the second position for confirmation. As they say never test the depth of water using your two feet.
I set stop losses at 3% - 5% higher than my filled price.
I don't set take profits, as I let the position ride with the trend, while only trailing my stop loss until its touched and i get out of the position. But my target for this pair is 0.85 by fall 2016.
Happy trading
Hussein Ahmed
* Technical Highlights:
1- The pair reversed the bullish trend that is represented in the XABCD pattern in purple that was signing a trend reversal to the upside from the overall bearish trend represented in the weekly chart. It was signing a trend reversal, because the pair did show a higher low and traded above the 200 DMA.
2- This bullish sign on the XABCD pattern returned to be a false breakout, and prices continued pushing down, continuing the bearish trend. Trading below the 200 Daily moving average, giving us a bearish bias on this pair. Also the black trend line as well as the 200 DMA acted as a very good resistance point on this pair.
3- Prices fell to a critical point to reach the support of the C leg at 0.94 in December, 2014. Prices kept on trading water after failing to break below that critical level. Prices then shoot up to breach the 200 DMA adding to more confusion for traders. The trend line could not hold as a support and prices again failed to stay above the 200 daily moving average, sending prices to re-test the C leg of the butterfly pattern which was rejected several times.
4- At final, prices broke that area of support "0.94" after 9 months of consolidation, suggesting more bearish bias on this pair. Now the 200 DMA has left the role of being the mere resistance level, and the 100 DMA is taking control of playing as a resistance level, suggesting further bearish bias.
5- The pair fell to touch the 0.915 level or the A Leg of the butterfly pattern, before breaking this level prices re-tested the 100 DMA and are poised to fall again.
6- If prices break the A leg pattern support, we could see a steep downtrend heading towards the next round level of 0.9000 and then 0.8500.
How to trade?
I already took a short position on this pair @ 0.976 with 50% of my position is filled and the other 50% will be filled after I see a breakout and a re-test of the 0.9158 support. I usually divide my position into two, the first position is to test the market and usually is the riskier one, while the second position for confirmation. As they say never test the depth of water using your two feet.
I set stop losses at 3% - 5% higher than my filled price.
I don't set take profits, as I let the position ride with the trend, while only trailing my stop loss until its touched and i get out of the position. But my target for this pair is 0.85 by fall 2016.
Happy trading
Hussein Ahmed