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AUDCAD Terminal Pattern to Offer Breakout Opportunity

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A few days ago I mentioned the potential double top pattern that had formed on the AUDCAD 4-hour chart ahead of the Reserve Bank of Australia rate decision. But despite a rate cut by the central bank that sent the currency reeling immediately following the announcement, the Australian dollar managed to end the session higher by 74 pips.

For AUDCAD, this meant a third retest of the 0.9970 handle, a level that capped two previous advances on July 13th and the 26th.

Fast forward to today and we can see that this area has now held as resistance for the third time. But more importantly, the August 2nd low at 0.9828 gave us insight into a level that would have otherwise gone unnoticed, or at least prevented us from identifying it to this degree of accuracy.

The trend line that extends from the June 10th low at 0.9389 has held as support on four separate occasions since inception. The last retest was, of course, our post-RBA low.

With this development, the AUDCAD finds itself trading within a terminal pattern where a move in either direction will offer a breakout opportunity. And with a limited amount of real estate remaining, that break has to come soon.

One suspected catalyst is this Friday’s slew of economic news out of Canada at 8:30 am EST. As part of its monthly schedule, the country will release employment data and trade figures for the previous month. An overly bullish or bearish reading as dictated by market participants could be enough to trigger a breakout on AUDCAD.

A close above 0.9970 would target the March high at 1.0050 while a breach of trend line support would expose the July 21st low at 0.9730. As for whether the break occurs this week or next is anyone’s guess.

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AUDCAD terminal pattern on the 4-hour chart

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