When I last covered AUDCAD, the pair was in the process of breaking below a twenty-month support level at 0.9410. We had been watching for a breakout from this level since April, when the pair was 100 pips away from making its third retest.
The day following last week’s breakout, AUDCAD came within 10 pips of retesting 0.9410. I know of a few traders who were able to get in on that retest, however I held off as I wanted to see a more significant test of the support-turned-resistance level.
As expected, the pair found support during Friday’s session at the 2013 low of 0.9170, giving those who managed an entry on the September 1st retest a 220 pip profit.
However the daily chart we viewed last Monday doesn’t tell the whole story. It’s important to sometimes take a step back to get a sense of the larger picture, something even the daily chart can’t always do.
The weekly chart below illustrates the significance of last week’s break and also highlights a descending channel that has been in play since 2010.
If you have followed me for any length of time, you know that I like to keep things simple. So in the spirit of simplicity, we can watch for one of two things to happen over the next couple weeks…
The pair continues to find buyers above 0.9170, in which case a retest of former support at 0.9410 may be in order. Such a retest would offer another opportunity to watch for a sell signal.
On the other hand, if the selling pressure proves too strong and the pair closes below 0.9170, we can watch for a selling opportunity on a retest of the level as new resistance.
How is that for simple?
Either way, we want to see where AUDCAD goes from here before we even begin to discuss a plan of attack. So let’s keep this one on our watch list for now until one of the two scenarios above materializes.
Keep in mind that we have the Bank of Canada rate statement on Wednesday at 10am EST followed by Australia’s employment figures at 9:30pm EST. Either event could easily turn out to be the catalyst needed to push AUDCAD back to 0.9410 or send it crashing through the 0.9170 support level.
Summary: Wait for a selling opportunity on a retest of 0.9410 as new resistance. If the pair is unable to rally from current levels, watch for a selling opportunity on a daily close below 0.9170. Current support comes in at 0.9170, 0.8985 and 0.8800.