Looking for Australian trades now that China printed a pessimistic inflation report?
Check out the elegant reversal formation on AUD/CAD!
The pair is just approaching the neckline support, so you may still be able to catch the double top breakdown.
Australian dollar / canadian dollar forex for one hour Planned by TV
Market players seem to be starting the week noticing risk aversion since China just released weaker than expected CPI and PPI numbers earlier today.
Instead of posting an estimated gain of 0.2% yoy, the headline CPI remained flat in June. Producer short prices also rose and recorded a sharp decline of 5.4% compared to the previous decline of 4.6%.
The Australian bears were quick to respond to the report, which led to a massive sell-off.
AUD/CAD seems to have room to slip, as the pair appears poised to break below the double neckline, which happens to line up with S1 (.8830) and the 200 SMA dynamic support.
If so, the price could drop at least as high as the chart pattern, which spans about 70 pips. This may be enough to bring it down to S2 (.8760) or lower.
Meanwhile, the Canadian dollar could enjoy some support leading up to the BoC’s decision, as the central bank is still widely expected to raise rates by another 0.25%.
Just be careful because technical indicators such as moving averages and stochastics are pointing to a possible return of bullish pressure.
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