Westpac says it is a good idea?
The AUDCAD is up strongly today after the minute of the last meeting were deemed more hawkish.
But according to Westpac, the reaction was "overinterpreted" and that will be reversed. Also the BOC is likely to continue to tighten which should solicit more CAD buying (AUDCAD selliing).
What do the charts say?
Looking at daily chart, the pair moved up to a pretty juicy level at the highs today.
- The 200 day MA comes in at 1.00308.
- The 50% retracement comes in at 1.00393.
- In addition a trend line off the May and June 2016 highs cuts across at 1.00424.
With three key tech tools in a 12 pips window, that is a low risk defining levels for rally sellers and sellers at the highs leaned against those levels. A move above then (and now), and the bias turns more bullish. Stay below (or fail on a break above the level) and it is more bearish.
Drilling to the hourly chart (see chart below), in addition to the 200 day MA, trend line on the daily and the 50%, if you connect the highs from June 16 and June 20, the high on June 27th stalled the high, and the high today did the same thing (see red circles on the hourly chart below).
Now... the price is currently down around the 1.0000 level. What do you do if you did not sell near the topside resistance cluster?
If you sell here, the risk is a break above the 200 day MA, the 50% and the trend lines between 1.00308 to 1.0043
Alternatively, wait for a potential move back higher and see if a short can be entered at a closer level to the risk defining area.
Employment will be released at 9:30 PM ET (Wednesday)/0130 GMT (Thursday) in the new trading day on Thursday. Perhaps there is a rally after the release that gives a better selling opportunity (and allows that risk event to come and go).