AUD CAD Analysis For Potential Swing Short W/C 16th July 2012

AUD CAD Analysis For Potential Swing Short W/C 16th July 2012

The Canadian Dollar has found strength against most currencies lately, but recent signs of it strengthening against the Australian Dollar have caught my interest.

Although the following set-ups look pretty tempting,  initial thoughts are to gauge AUD:CAD against shorting currencies such as GBP or possibly EUR against the Canadian Dollar because AUD:CAD weakness could significantly accelerate downside in these other weaker currencies that are already in confirmed down trends against CAD.

Firstly the Weekly chart shows that following a breakdown of a long term rising wedge, price rebounded and appears to be finding resistance at the 61.8% fib retracement. A back test of the rising wedge would be a more favourable set-up, but it’s difficult to say at this stage whether that will occur. Negative MACD Divergence has been plentiful over the last 18 Months:

The Daily chart displays that same Fibonacci retracement and early signs of MACD divergence:

In the 4 hourly chart we can see the trendline that supported price over the last Month has broken and subsequently acted as resistance on price’s attempt to break back above it. MACD looks oversold on this time frame, but the divergence that preceded it remains a strong indication of the overall bias here. Watching how price reacts around converging MA’s right at the current level will almost certainly give further clues towards the next move:

Looking at the same picture but within the hourly time frame, MACD is heading back to overbought levels and if the next downwards MACD cross occurs at price resistance this would offer a nice low risk short entry. Again, converging MA’s on this time frame, just above the current price level here will be worth keeping a close eye on:

Drilling right down to the 5 minute time frame we can see price has retraced 50% of it’s last swing move, and short term upside risk probably resides at the 61.8% level which would coincide with a re-test of the original break-down level as defined by that bearish engulfing candle circled:

In conclusion I’m somewhat tempted to enter this trade right now, but I also think waiting a day or 2 for additional confirmation or further price consolidation will strengthen this technical argument for downside to come.

Meanwhile I think it will be very prudent to keep track of GBP and EUR price action against CAD, because if AUD starts weakening against CAD, then the existing GBP and EUR down trends can only accelerate and these could offer quicker returns.

  • RS2OOO
    Posted at 14:01h, 18 July

    No confirmation to enter this trade as yet, but keeping an eye on the 61.8% retrace level on Daily time frame, ideally looking for 2 or 3 doji’s (above the fib level) alongside continuing MACD divergence.

    Will post another comment if and when the position is taken.

  • RS2OOO
    Posted at 07:51h, 19 July

    Initiating a short from 1.0494

    Will watch intraday to gauge whether I’ve got this right short term and will go from there.

  • Pingback:This Week’s Swing Trading Round-Up 22nd July 2012
    Posted at 11:48h, 22 July

    […] few possible swing set-ups in progress but only one trade was taken this Week.Following on from the AUD:CAD analysis I decided to enter a short position based on TA across a combination of  time frames, […]

  • RS2OOO
    Posted at 20:32h, 23 July

    Closed AUD:CAD swing short at 1.0454 for +40 pts based on a buy signal on lower time frames.

    The swing set-up remains valid and in progress, but no point letting the profit go in the meantime.

  • RS2OOO
    Posted at 09:23h, 27 July

    Re-shorted AUD:CAD at 1.0525

    Will look to stop out on a Daily close above 1.0529

  • Pingback:This Week's Full Trading Review, A Tough Week! 28th July 2012
    Posted at 20:55h, 29 July

    […] results remind me that TA must play a major part!I came into the Week with one open trade, an AUD:CAD short, but on Monday my Day Trading system gave a long signal on the 5 minute time frame, so I […]

  • RS2OOO
    Posted at 21:07h, 02 August

    This short was stopped out at 1.0563 for -46 points.

    Based on the eventual daily candle close, the trade could still be valid and I did re-short it as a day trade, but will give it more time before committing to another swing short.

  • Pingback:This Week's Trading Review & Market Forecast 4th August 2012
    Posted at 15:19h, 04 August

    […] this affect my Swing trades?The initial spike upwards on all risk markets managed to stop out my AUD:CAD swing short as new high’s were made incurring a loss of  -46 points. Not a huge loss […]