AUD/CAD Weekly outlook – 02 Jan 06 Jan
With the last week of the year historically favoring ‘quieter’ trading conditions with lower volume & volatility it was surprising to see the last day of the trading year providing some movement and direction. The Aussie gained ground over the Cad in late trading, eventually closing up 130pips from its week lows.
The weekly and monthly charts both suggest the bullish bias to continue with both closing as strong inside bullish pin bars.
In the weekly chart below we can see the market closed the week with yet another inside bar (the 4th in a row). With 3 of the 4 bars being bullish pin bars the bulls look to be in charge of this market. Upper resistance comes in at 1.0530 which coincides with the outside bars highs. Should we see a break, close and hold above this area we could expect the market to continue to highs at 1.0664 and possibly beyond.
Something to take note of is the gap which has yet to be filled from late November. It’s uncommon for the market to leave a gap open for an extended period of time which may hold back any bullish movement (at least for the short term).
The monthly chart below further strengthens out bullish bias for the pair. The market has been in a bullish trend for a long period of time and has formed a ‘stepping’ pattern with a series of: L, H, HL, HH, HL, and HH. The last two months have also closed as bullish pin bars with December closing inside Novembers range.
We will be waiting for a 50% retracement of the weekly pin bar and looking to enter on limit using the Daily and 4hr charts to define our entry. Stops could be placed at last weeks lows, or a more conservative approach could be to place a stop at the bottom on November’s gap. Initially we will look to target the markets highs at 1.0664 with further gains in sight.
