23 Mar GPB:CAD, AUD:CAD & EUR:CAD Analysis; W/C 24th March 2014
Following a sustained weakness in the Canadian Dollar a number of CAD pairs are showing signs of exhaustion which happens to coincide with Fibonacci retracement levels and areas of potential short to medium term resistance.
In particular there are 3 pairs that have my interest so I’ll start with the favoured one.
Recently I suggested AUD:CAD may enter a phase of consolidation that could support a swing short, however that set-up didn’t materialise and the pair continued its rally and now sits comfortably overbought on some time frames (but not all). The Daily chart hasn’t confirmed itself as overbought at this stage but price has reached levels worthy of watching ahead of this set-up being confirmed. In fact whilst typing this I’ve just entered an aggressive short at 1.0217 which is risky as I’m front running the chart confirmation.
The Daily chart below show’s price having reached the 61.8% retrace of the major swing move that has been taking place since April 2013. Furthermore Friday’s high is precisely 50% between the high and the low of the 2 Year trading range that contained price between 2011 and 2013. It is very common for price to find turbulence mid-way between an old trading range so even if this current trade isn’t the right trade there’s a good chance the trade can eventually be closed with minimal financial damage. Based on that old trading range there are a number of minor resistances between the current print and around 1.0280 so I’ve placed a stop loss at 1.0285 on the basis that any price extension beyond that level almost certainly deems this trade to be wrong.
MACD hasn’t yet crossed over so this could be my downfall for this particular trade as there’s no confirmation as yet that it wont continue higher to break the pattern of lower highs.
The ideal initial target for the trade is around the 0.9920 region which previously supported the 2 Year trading range.
This one again shows some signs of difficulty in continuing the rally over the short term and the Weekly MACD looks almost certain to cross over which should see a small correction on price at the very least. However I think eventually we will see price move higher to test stronger resistance in the 1.9300 region. Looking at this chart now I find it hard to believe I bought the break out from 1.6395…. if only I’d held that trade!
Again this pair having also retraced to it’s 61.8% fib on the Weekly chart could see some traders easing their positions and a small correction could ensue:
Before signing off I’d just like to remind you of the AUD:GBP analysis recently posted here. I’m yet to take a position in this pair but it is starting to look like a bottoming process is taking place ahead of its eventual rally that will take it all the way up to the 0.6184 region.