AUD/CAD Could Face Resistance at 0.9655

2 Comments

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Last Updated: 10 min ago

A bearish butterfly pattern is forming on the AUD/CAD 1hr Chart below.  This pattern has excellent symmetry and would enter just above the 61.8% Fibonacci retracement of YZ.  Although there are not a lot of extras for this trade, it is a textbook set up at this point.  If the pair rises and completes with good time symmetry, this is an above average set up.

We are looking to sell the AUD/CAD if it rises to 0.9655 (Point D).  Point D is located at the convergence of the following points:

  • 161.8% Fibonacci extension of XA.
  • 161.8% Fibonacci extension of BC.
  • AB=CD
  • 61.8% Fibonacci retracement of YZ.
  • We will now jump into possible red flags that could invalidate this trade.  If there are long bars near the completion of CD, then the trade should not be taken.  If the pair comes within 10 pips of reaching our entry, does not enter, and reaches T1 before entering, the trade is invalid.  The trade is also invalid if the pair falls below 0.9520 before hitting our entry.

    To recap, we will look to sell the AUD/CAD at 0.9655 with our stop placed at 0.9687.  Our initial profit targets are 0.9607 (38.2% of CD) and 0.9568 (61.8% of CD).


      • Daily Chart - Trade would enter just above 61.8% of YZ.

      • 1hr Chart - Bearish butterfly; sell at 0.9655.

    Comments (2)

    Big A
    January 27, 2010 at 03:59 PM ET
    I have been short since 96.3, expecting a move down to 93.03 over the coming weeks. The pair has been pretty well supported by the 20 day sma, do you see the pair moving up over the coming weeks to test the 97.2 level?
    bgareiss
    January 27, 2010 at 04:13 PM ET
    At this point I won't be doing anything with this pair since our trade has been invalidated. I really don't have an opinion, but that could change. If that does change, I will post it on the site. Brad

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