The Canadian dollar has got some serious love from the markets today as President Trump has said he wants NAFTA negotiations to be finished by the end of the week. The market has seen this as a positive for the CAD as for some time now a lot of speculation has been driving it lower. The result those has made some waves, and could provide certainty for the economy, which surprisingly has not been booming as much on the back of higher oil prices like one would normally expect. Looking at the USDCAD one thing is clear to see and that is technical's are looking more and more relevant and none more so than the old head and shoulders pattern.
A head and shoulders pattern is not uncommon, but does not always work as planned. If you do see a run then it can be quite deep and this instance a target would be at least the 1.2681 support level. Right now though the support at 1.2807 (neck level) has so far been holding back further moves, but the market is looking for a strong breakout here to confirm the pattern and look to run with things. Additionally, I would also be watching for the 200 day moving average which is on the chart and is likely to add another layer of support, but if the market is keen to run it will move quickly. If things do bounce back up, then I would expect resistance at 1.2923 to be quick to hold back the bulls in this market.
The Australian dollar got off to a weak start for the week as the Reserve Bank of Australia talked down the possibility of an interest rate rise, citing weaker inflation and only a gradual return to normal levels. The result was a little bit of strength in the AUD, but any hawks that were once around have been silenced by the sluggish rate of growth for the economy and the weak inflation figures. One thing that is key though is of course the AUDUSD and its movements, which have become a great technical trade for many traders in the current market environment.
The AUDUSD on the charts has shown some resurgence from the bulls on the back of weakness in the USD, but it cannot make any gains as of late to break through resistance at 0.7680 at present. At the same time we see a tight band of support has also formed at 0.7658 which is the market moving sideways away from the trend line and looking to shift in a direction when it gets a clear breakout. As this is a bearish wedge, I am still following the trend this time around and long term direction is probably still towards 0.7546, unless we see anything drastic change in the market.
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