AUD/CAD is looking ripe for potential technical based opportunities with a solid uptrend in play and clear areas of strong interest.
Where may the bulls and bears play next to keep or break the move higher?
AUD/CAD 4-Hour Chart by TradingView
Directional biases and volatility conditions in market price are typically driven by fundamentals. If you lack a fundamental-based price outlook for AUD/CAD, then it’s time to do some digging by checking out the forex calendar and stay updated on daily fundamental news!
After you’ve done your homework and if you think Aussie will out perform the Loonie this week, then there are a few setups to throw on the watch list in case your fundamental scenarios of choice play out.
On the 4-hour chart above, we can see AUD/CAD has been in a uptrend ever since the market broke above and drew in buyers at the 200 SMA at the end of October. It’s been a pretty steady rise higher, but over the past week the market has consolidate into a range between 0.8950 to roughly 0.9000.
Consolidation patterns do tend lead to breakout setups, especially when assets are expecting short-term volatility catalysts, which is the case for both the Aussie (Australian CPI) and the Loonie (Canada GDP and employment updates).
For all of you long biases traders, a sustained upside break is the pattern to watch out for before moving AUD/CAD from watchlist to doing work on a risk management plan.
Now, if the market breaks down from there and you’re leaning bullish for a swing play, then the pullback may be an opportunity to play the uptrend at better prices, if the fundies still make sense.
In that scenario, traders may be watching a very strong area of interest on the chart above where several technical confluences can be seen. Right at the 0.8900 major psychological level, we see an mix of rising 100 simple moving average, S1 pivot support level, a rising ‘lows’ trendline, and a broken resistance area turned potential support area.
This is a lot of technical arguments that may draw in long orders, so it’s definitely an area to watch for bullish reversal patterns, again if the fundamentals still make sense at that point. And if buyers are drawn to that area, AUD/CAD may be set to make new highs in the uptrend, potentially as high as the 0.9100 area within a week given the daily Average True Range of around 60 pips.
For all of you fundamental bears out there on AUD/CAD, that same confluence area we just highlighted is one to watch for a potential sustained downside break before moving AUD/CAD from watchlist to working on a potential short setup.
A sustained break below the 100 simple moving average or trendline could draw in not only technical bears, but potentially also profit takers who may sell to lock in gains from the November rally in the pair.
And if that scenario plays out, a move to S3 pivot support is a possibility given the daily ATR, which also happens to line up roughly with the 200 simple moving average. This may be area that could draw in buyers in the short-term, similar to the last retest back in October.
But what do you think? We love to hear everyone’s ideas so feel free to drop a comment below and share your thoughts!
