AUDCAD setting up for a double bottom and wave 4
AUDCAD is predicted to move lower, and started trending down, so I am going long. It's complicated...
Let me explain why, to sum up it is because nothing ever goes in a straight line, and trends have waves.
I would not recommend doing this to someone working at a hedge fund or bank, unless they are trying to get fired.
Fundamental drivers & economic calendar
In March Canada gained 303K jobs which is even better than the previous month (260K) and far beyond what was expected.
In March Australia "only" gained 70K jobs, and of course every Forex trader knows the population of Australia and Canada.
AUD/CAD just like AUD/Everything has been violently going up since March 2020 as you know.
Australia numbers are better than Canada ones, but Canada numbers are becoming "less bad".
Now that economies are going back to normal, it might be the time for the AUD 1 year rally to cool off a little.
Today the big news were the March trade balance numbers, far below what was expected, and the RBA statement (they maintain rates).
The net export numbers for March might be what slapped the australian dollar down today but they're not a huge deal either,
and obviously it's not a long term thing that will create a huge change in the value of the currency.
The important events to watch will be:
Perhaps the Canada central bank governor speech tomorrow,
and then Canada employment numbers this Friday,
next week Australia consumption (retail sales) on monday,
next week thursday Australia employment numbers.
Between now and Friday or even late next week there are no (foreseeable) potential violent news that will push the CAD even higher, or AUD lower.
Price Support
I have identified a strong support area that goes way back at around 0.945.
Indeed as you can see below, the price has been bouncing very strongly off this level several time:
The recent price action has again confirmed this support.
We might be in the presence of a double bottom, again, as there was another one a month ago on 0.95 as I have shown higher.
We can also add the diagonal support that follows:
Wave analysis
We note the following:
- The price made a wave 3 which extended to the common 1.618, from which a wave 4 often starts
- Retail is up to 90% long, they are not a huge proportion of market participants but still a good representation of what baddies are doing
- Wave 2 retraced to the typical 61.8% level, we can expect wave 4 to get to 38.2%
- Wave 3 here is the big one (for now), even if the current downmove is (5) it has decent odds of being really small anyway
This looks like a wave 3 ending. Of course we do not bet on a complete reversal, but simply a pullback, 38.2% being the most likely one.
No point holding too strongly, bad traders, which are typically mega long (Over 75% here) at the bottom of downtrends,
are very quick to close their troll positions as soon as the market rallies a little.
All in all a solid buy, I am very picky about going "countertrend" I think it is stupid 99% of the time, this is one of these exceptions.
There are several ways to play this, placing a buy at the lows with a tight stop (I would not go below 1:3 risk to reward),
waiting for a vertical candle down on a low timeframe (M30 let's say) followed by a green one (and enter at close), etc...
Not a recommendation to buy or sell, I would myself enter quite aggressively, trade it if you want to and how ever you want to.
And as always with chart patterns these days, the textbook way to trade double bottoms is a great way to lose money,
by the time you enter (at the neckline) the price is already at - or almost at - target.
The second the majority hears of a chart pattern, their risk & loss aversion ruins it near instantly.
Let me explain why, to sum up it is because nothing ever goes in a straight line, and trends have waves.
I would not recommend doing this to someone working at a hedge fund or bank, unless they are trying to get fired.
Fundamental drivers & economic calendar
In March Canada gained 303K jobs which is even better than the previous month (260K) and far beyond what was expected.
In March Australia "only" gained 70K jobs, and of course every Forex trader knows the population of Australia and Canada.
AUD/CAD just like AUD/Everything has been violently going up since March 2020 as you know.
Australia numbers are better than Canada ones, but Canada numbers are becoming "less bad".
Now that economies are going back to normal, it might be the time for the AUD 1 year rally to cool off a little.
Today the big news were the March trade balance numbers, far below what was expected, and the RBA statement (they maintain rates).
The net export numbers for March might be what slapped the australian dollar down today but they're not a huge deal either,
and obviously it's not a long term thing that will create a huge change in the value of the currency.
The important events to watch will be:
Perhaps the Canada central bank governor speech tomorrow,
and then Canada employment numbers this Friday,
next week Australia consumption (retail sales) on monday,
next week thursday Australia employment numbers.
Between now and Friday or even late next week there are no (foreseeable) potential violent news that will push the CAD even higher, or AUD lower.
Price Support
I have identified a strong support area that goes way back at around 0.945.
Indeed as you can see below, the price has been bouncing very strongly off this level several time:
The recent price action has again confirmed this support.
We might be in the presence of a double bottom, again, as there was another one a month ago on 0.95 as I have shown higher.
We can also add the diagonal support that follows:
Wave analysis
We note the following:
- The price made a wave 3 which extended to the common 1.618, from which a wave 4 often starts
- Retail is up to 90% long, they are not a huge proportion of market participants but still a good representation of what baddies are doing
- Wave 2 retraced to the typical 61.8% level, we can expect wave 4 to get to 38.2%
- Wave 3 here is the big one (for now), even if the current downmove is (5) it has decent odds of being really small anyway
This looks like a wave 3 ending. Of course we do not bet on a complete reversal, but simply a pullback, 38.2% being the most likely one.
No point holding too strongly, bad traders, which are typically mega long (Over 75% here) at the bottom of downtrends,
are very quick to close their troll positions as soon as the market rallies a little.
All in all a solid buy, I am very picky about going "countertrend" I think it is stupid 99% of the time, this is one of these exceptions.
There are several ways to play this, placing a buy at the lows with a tight stop (I would not go below 1:3 risk to reward),
waiting for a vertical candle down on a low timeframe (M30 let's say) followed by a green one (and enter at close), etc...
Not a recommendation to buy or sell, I would myself enter quite aggressively, trade it if you want to and how ever you want to.
And as always with chart patterns these days, the textbook way to trade double bottoms is a great way to lose money,
by the time you enter (at the neckline) the price is already at - or almost at - target.
The second the majority hears of a chart pattern, their risk & loss aversion ruins it near instantly.
Comment:
I got kicked out but if I was still in I'd be ambitious aiming for a high target over 0.96.
