Bullish AUD/CAD Moving Along Nicely, Targeting .925-.9393

Last updated 6/19/2009 1:13 PM EST (GMT -5) 0 Comments - Add your comment

FX360 Technical Analyst Staff

Technical Analyst, GFT

Going back to the April 7th technical feature, " AUD/CAD is Pair to Watch ," the longer-term move has played out as discussed (compare weekly charts). Current price action confirms the bullish continuation up to converging Fibonacci resistance (and bearish Gartley pattern completion) near .9250-.9300 based on 3 factors. First, the recent bullish gap on the weekly suggests strength to the upside. Second, prices have recently reached new highs eclipsing the .90 handle for the first time in nearly a year (last time AUD/CAD was trading above .90 was late-August 2008). Last but not least...a new/emerging bearish butterfly pattern is also projected to complete near this previously stated resistance. So this resistance reflects the final target to any bullish position, as well as a new short entry (swing reversal).

There are, of course, several levels of shorter-term/minor resistance that the AUD/CAD will have to break through on the way up to weekly resistance, so rather than blindly jumping into a long position right now we will remain patient and look to buy a pullback off a short-term bullish ABCD pattern completion. Unfortunately, there's currently is no clear bullish pattern emerging on shorter time frame (intraday) charts (1hr or less).

However, the 15min chart below provides a great example of how we can use these geometric Fibonacci-based patterns across multiple time frames to pinpoint entries and exits significantly improving risk-to-reward. The 15min shows a couple pullback in which a bullish 127.2% ABCD pattern completed near 38.2%/50% support of the swing leading into point A (XA leg) giving us repeating bullish Gartley patterns and an ideal point to enter a long position. Generally speaking, this is significant for a couple reasons. First, patterns have a tendency to repeat so it would not come as a shock to see another 127.2% ABCD pattern complete near 38.2%/50% support of these shorter-term spikes. Second, 38.2%/50% retracement preceding a new high or low are oftentimes signs of a strongly trending market where a strong continuation move may be in progress.

So waiting to buy off a pullback will help decrease risk, but waiting to buy a pullback off geometric pattern completion  on shorter time-frames is a way to fine tune or  pin point our entry and stop-loss (risk) enhancing that ever-so-important risk/reward ratio that is crucial to trading success (as it reduces the need for a higher winning percentage). Think…”ten dimes make a dollar.”

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  • 15min Chart - Looking to buy off short-term bullish ABCD pattern completion...
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  • Weekly Chart - Room up to converging fib resistance, and bearish Gartley/butterfly patterns, near D

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