AUD/CAD Key Range Trade- Limited Event Risk

The AUD/CAD pair has remained range bound for the past few sessions and presents traders with scalping opportunities after daily RSI signaled strong bearish divergence.

The AUD/CAD has recently come under pressure after failing to hold above the 50% long-term Fibonacci extension taken from the June 8th 2010 and March 17th 2011 troughs at 1.0450. The pair has traded within an ascending channel since late April, with a larger encompassing ascending wedge formation holding since June of 2010. However with the downturn in risk appetite and equities seen over the past few weeks, both the aussie and the loonie have come under pressure causing the AUD/CAD pair to remain fairly range bound and presenting scalping opportunities on both sides of the trade. A closer examination of a daily chart sees strong bearish RSI divergence, and accordingly our bias is as such. It's important to note that the 50-day moving average rests just below the lower bound trendline at 1.03-handle and may provide some interim support. A break at this level could see accelerated losses for the aussie and would support this specific scalp trade.

A 30min chart reveals the AUD/CAD pair ranging between the 100% and 61.8% Fibonacci extensions taken from the April 29th and June 6th crests. Preferred short entry targets are eyed at the 61.8% extension at the 1.04-handle, backed by 50% extension at 1.0430, and just below the 38.2% extension at 1.0455. Support targets are held at 1.0330 followed by the 1.0305 and 1.0270. With a 2-hour average true range of 31.62, profit targets for said scalp should be between 18-26 pips depending on entry. Note that the trade will not be in play until a confirmed break of the 76.4% extension around 1.0360 or a re-test of the 1.04-figure. Once the scalp is active, the levels will remain in play until such time when either of the topside/bottom limit targets are compromised.

Key Thresholds

A daily RSI read of 51.33 suggests the pair remains fairly anchored with the indicator continuing to flatten in the past few sessions. We reckon a breach above the topside limit at 1.0460 negates the bearish bias on the trade with such a scenario eyeing the topside break-target at 1.0495. Likewise a break below the bottom limit at 1.0270 risks further losses for the aussie with subsequent floors seen at 1.0250 and 1.0220.

Indicator	Timeframe	Level
Fibonacci Extension – 23.6%	1hour	1.0497
Fibonacci Extension – 38.2%	1hour	1.0460
Fibonacci Extension – 50%	1hour	1.0430
Fibonacci Extension – 61.8%	1hour	1.0400
Fibonacci Extension – 76.4%	1hour	1.0363
Fibonacci Extension – 100%	1hour	1.0303
Fibonacci Extension – 100%	1hour	1.0147
20-SMA	Daily	1.0380
50-SMA	Daily	1.0300
100-SMA	Daily	1.0115
RSI	Daily	51.33
Resistance 1 Target	30min	1.0400
Resistance 2 Target	30min	1.0430
Topside Limit	30min	1.0455
Topside Limit Break-Targets	30min	1.0495
Support 1 Target	30min	1.0330
Support 2 Target	30min	1.0305
Bottom Limit	30min	1.0270
Bottom Limit Break-Targets	30min	1.0250
Average True Range	2hour	31.62

Related Economic Data Releases

Notwithstanding further developments regarding Greece, event risk for the pair is rather negligible for the remainder of the week with Canadian wholesale sales the only piece of data on tap. Consensus estimates call for a print of -0.3% m/m, down from a previous gain of 0.1% m/m. As cited in yesterday's scalp report, the largest risk to this specific trade will be swings in market sentiment, with a pickup in risk likely to benefit the aussie more. Such a scenario would invalidate our bias, with the topside resistance targets now used as profit limits on long positions.

Upcoming Events

Country	Date	GMT	Importance	Release	Expected	Prior
CAD	6/17	12:30	LOW	Wholesale Sales (MoM) (APR)	-0.3%	0.1%

Written by Michael Boutros, Currency Analyst for DailyFX.com

To contact the author of this report or subscribe to their daily analysis, please send inquiries to:mboutros@dailyfx.com

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