It’s no secret that the Canadian dollar has been outpacing its counterparts of late. On Tuesday, I mentioned an area on GBPCAD that was likely to accelerate selling pressure if broken. That level gave way shortly thereafter, and the pair is now lower by nearly 300 pips.
Just yesterday I covered the bear flag on USDCAD. Several hours after that commentary went out the pair dropped below the 1.30 handle on a daily closing basis and is now off of those levels by more than 60 pips.
As they say where I’m from, if it ain’t broke, don’t fix it.
To apply this line of thinking to Forex, if you see a currency beginning to strengthen or weaken across the board, look around to see where you can exploit it rather than searching elsewhere. In other words, take an inventory of the technical patterns for that particular currency to see where you can put your trading edge to work.
With this in mind, let’s review another CAD pair I mentioned at the beginning of the month. While the ascending trend line on AUDCAD is still intact, yesterday’s bearish engulfing pattern should be cause for concern if you’re long.
The massive 140 pip daily candle engulfed the previous three sessions and also put the pair back below the March high at 1.0050. This combination leaves AUDCAD looking vulnerable going into next week.
However, I’m not as interested in trading the bearish engulfing pattern as I am in a potential break below ascending channel support. With four touches since its inception in June (today being the fourth), this is one level that I’ll be keeping a close eye on as we head into a new week of trade.
A break below support would target 0.9730 followed by the post-Brexit low at 0.9490. Do note that there is also minor support near the August 2nd low of 0.9830.
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