This idea is predominantly based on price action and the increasingly bearish technical set-up for AUD/CAD.
We’ve seen an ABC equality target complete from the August 2013 low, which could suggest a correction, while negative divergence has been seen on stochastics (relative to price) – both can be seen on the chart.
The pair is holding the uptrend drawn from the 2014 low at 1.0230 and thus a close below this trend could be a further bearish development.
I feel therefore waiting until we see a daily close (7am AEST) below this trend to enter short positions and will update the idea tomorrow.
We’ve seen the pair close below the 21-day moving average for four consecutive days, and this average has been good support for a couple of months.
On the daily chart stochastics are falling, however on the weekly chart we are starting to see this oscillator head lower. A move below the 80 level would be bearish and suggest a longer-term correction could be on the cards.
Fundamentally I prefer holding AUD to CAD, although from a positioning perspective the market seems long on AUDs.
While there is a huge amount of global data and event risk this week, there is a limited data flow out of Canada and Australia. Perhaps Wednesday’s Canadian Q1 GDP could move the CAD, although it is not expected to change from the prior read of 2.5%.