AUDCAD: Holding On To Medium Term Trend Direction Following Short Term Pull Back
The daily candle chart below shows the price history of the Australian Dollar (AUD) versus the Canadian Dollar (CAD) over the medium term (since late October 2012 to the present). This pair is known as AUDCAD and is currently trading near .9907 (as of publication) which is only a few pips under the session high as of 99.10 as of publication, following a progressively lower close over the past five trading sessions (not accounting for yesterday).
In a repeat over the previous articles' pullback where the pair since regained its medium term uptrend, the AUDCAD has yet again managed to begin an ascent following a very short term bearish line (point 3 in blue on chart) and pullback (point 4 in yellow) over last week. This reversal appears to also have been supported by the lower side of a regression analysis indicator, plotted over the last 100 trading days (point 8 in green).
If the bullish momentum of today’s session continues along the very short term bullish trend line (such as point 5 in aqua), the 50% Fibonacci retracement level (point 6 in white) could be retested and with future resistance possible near the 61.8% Fibonacci level (also point 6 – higher), just above near 101.00.
If the current support, or support near the anticipated 50% Fibonacci level fails, the very short term bearish momentum (along point 3) may continue with the 38.2% Fibonacci level as potential support near 97.60.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .9919 with a Limit to take profit @ .9939 and a stop-loss @.9905 Risk/Reward Summary: Limit risk = +20 pips profit / (-14) Stop-loss risk = Gain to Loss ratio = 1.42
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .9799 with a Limit to take profit @ .9761 and a stop-loss @ .9823 Risk/Reward Summary: Limit risk = +38 pips profit / (-24) Stop-loss risk = Gain to Loss Ratio = 1.58
medium term daily candle chart: