Tag Archives: AUD/CAD

Trade Review: AUD/CAD (+311 pips)

Entered AUD/CAD long at 1.0248 on 12 Aug added on Aug 15 at 1.0295. Exited 23 Aug (+147 pips) at 1.0395 and 30 Aug (+164 pips) at 1.0459. Result: +311 pips.


Entered with a stop at 1.01 and a target of 1.05. Greatest open loss: 80 pips Greatest open gain: 340 pips.

Technicals were the primary driver for a long AUD/CAD entered on Aug. 12. The weekly chart caught my attention due to the dragonfly reversal. I also noted how rate hikes were overpriced in Canada.

My full reasoning was here

I noted that my next best idea was short CHF/JPY and that would have also been an excellent trade that was never in a negative position and gained as much as 600 pips in the same time frame.

After the break of 1.03 on Aug 14, we waited for a pullback and doubled our long position at 1.0295.

On Aug. 17 we noted there was no reason to take profits but the pair went on to post its worst one-day performance of the trade, falling 100 pips.

Despite this, we remained confident and felt a bounce to 1.03 (at least) was about to happen.

We went back to the weekly chart on Friday and it continued to look lucrative.

On Aug 22 we were rewarded with a surge to 1.04. We accurately saw this as a great time to take some profits. This allowed us to hang onto the second part of the trade for an additional 60 pips (above where we sold the first unit).

What I’ve learned: I may have rushed into buying the second unit after the break of 1.03. As we saw, there was a deeper pullback than I anticipated and this was the only time I was nervous about the trade. I targeted 1.05 so I may have exited the trade too soon. The weekly chart looks like it will get to at least 1.0550 but I’m nitpicking at a great trade.

 

What I’m happy about: Lots. I saw a lucrative pattern on a weekly chart and hung onto the trade for close to three weeks. The thing I’m most proud of is the way I sold the first part of the trade at the perfect time, nearly nailing the top on the bounce over 1.04 and locking in a nice profit that allowed me to easily wait out the next run toward the ultimate target. Opening a trade with two units or adding a second unit early on is my favourite manner of trading because it gives me this flexibility. I’m also pretty happy about noting that short CHF/JPY was my second favourite idea.

 

 

 

 

 

 

 

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Sold AUD/CAD at 1.0459 (+164 pips)

We’ve wrapped up a great AUD/CAD trade by taking profits on the second part at 1.0459 for a gain of 164 pips. We sold the first part on Aug. 23 for a gain of 147 pips. The combined net gain of the trade was 311 pips. For those with interest earning accounts, this trade would have also provided positive carry for 18 days.

This was our only trade of the month and we loved every minute of it. We avoided the volatility elsewhere and were holding a profitable position nearly every day.

The trade was based on the weekly chart that we posted here and at chart.ly. We pointed out the dragonfly reversal and a noted that it pointed to a re-test of 1.05.

AUD/CAD reached as high as 1.0480 yesterday and has been up for four consecutive days. We may see another 40-60 pips of immediate upside in this trade but we’re now growing more bearish about the global economy and are looking to put on some trades reflecting that. We expect to see some sort of spike higher in risk trades followed by a reversal in the next day our two. Follow @FX_Button for all the trades.

I want to let this trade sink in and I will have a full review with charts tomorrow.

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Adding to AUD/CAD Ahead of RBA Minutes

We like the Australian dollar ahead of the RBA minutes for a short-term trade and since AUD/CAD has acted as we expected, we’re going to add to our longs here at 1.0295.

 

We bought AUD/CAD on Friday at 1.0248. Read about it here:

 

Our catalyst for buying now is today’s release of the Aug. 2 Reserve Bank of Australia meeting minutes at 0130 GMT . If we remember back to the previous meeting minutes, the RBA came out more hawkish than expected and it led to a 500 pip boost in AUD/USD and 400 pip boost in AUD/CAD in the next two weeks. We expect to see something similar, albeit not as dramatic.

 

We like the trade because we believe there was a lively debate about hiking rates at the meeting. The discussion took place one week after Q2 CPI hit 3.6% y/y (compared to 3.3% in Q1). Officials in the statement emphasized that inflation had peaked but we don’t believe this was a universal sentiment. We also believe upbeat talk about the domestic economy could give AUD a boost.

 

The downside risks relate to offshore activity. The RBA was incredibly smart/lucky not to hike rates ahead of the wave of risk aversion that hit markets just hours after the decision. They noted external risks and, of course, some of those have come to pass. The risk to our trade is that the market will ignore upbeat comments on inflation and growth and recognize that some of the downside scenarios related to offshore developments have come to pass. Any discussion about cutting rates would cripple our trade but we see it as a less than 1% chance.

 

On balance, even if the main downside scenario comes to pass, we don’t see a large scope for AUD to fall.

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Bought AUD/CAD at 1.0248

Technicals were the primary driver for a long AUD/CAD trade I entered Friday. I announced the trade on twitter via FX_Button.

 

Every Friday, shortly before the market close, I take a look at the weekly charts and see if anything jumps out. This turnaround, along with probably reversals in CHF crosses caught my attention. The reversals in CHF look convincing but I’m reluctant to fight the huge upward trend in CHF.

 

Let’s have a look at AUD/CAD weekly chart.

 

AUDCAD Weekly Aug 12
AUD/CAD Weekly One-year

The dragonfly doji reversal pattern is what jumped out. AUD also looks strong against USD but with this trade I minimize the difficult risk on/risk off trade.

 

Breaking down the fundamentals also creates a convincing trade. Despite the furor about the soft AUD jobs data and potential rates cuts this year, we are not yet convinced. The RBA took a small step toward HIKING rates at the last meeting, while warning about potential downside risks off shore. It appears as though some of those risks are coming to pass (esp. in US and Europe) but that, alone, will not be enough for the RBA to cut rates. At the same time, Chinese and Japanese data has been stronger than expected.

 

The same risks apply to Canada. What leaves CAD more vulnerable is that the market is pricing in rate hikes in Canada in the coming six months. With US growth faltering, we highly doubt those hikes are still on the table. If fact, we see the BOC as more likely to cut rates that the RBA.

 

With this trade, we will look to add around 1.03 for an initial target of 1.05. So far the early Asia-Pac trade has been good to us after a curious rally in CAD in the final 30 minutes of trading on Friday but us behind 35 pips almost immediately. Those losses have been recovered with the pair gaining 80 pips so far this week.

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