Descending broadening wedge pattern broken, is this actually a trend reversal? volatility spike or fake out? will the pair retest the broken resistance and buy or break down and continue selling?
In this article, we will examine the aud/cad currency pair using the fundamental, technical, and sentiment analysis to find out if this setup is viable, read through to find out more.
Table of Contents
Economic events on Aud
Monetary Policy Meeting Minutes:
The monetary policy meeting minutes are a detailed record of the (RBA) Reserve Bank Board’s most recent meeting, it provides in-depth insights into the economic conditions which influences their decision on where to set interest rates.
Info is released 11 times per year, 2 weeks after the Cash Rate is announced, it is good for currency when more hawkish than expected.
This measures the change in the number of employed individuals during the past month, it is vital economic data released shortly after the end of a month. The combination of importance and earliness makes for huge market impacts.
Job creation and availability is an important leading indicator of consumer spending, this basically accounts for a majority of overall economic activity, Data is released monthly about 15 days after the month ends, if ‘Actual’ is greater than ‘Forecast’, it is considered good for the currency.
Economic events on Cad
Consumer Price Index (CPI):
The consumer price index (CPI) is the most important inflation-related release due to its earliness and broad scope. It is among the few non-seasonally adjusted number calculation most commonly reported on the calendar.
However it measures the changes in the price of goods and services purchased by consumers, The average price of various goods and services is sampled and then compared with the previous sampling.
Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because the rise in prices of goods and services prompts the central bank to raise interest rates with respect to their inflation containment mandate.
This data is released monthly, usually on the third Wednesday after the month ends, if the ‘Actual’ outcome is greater than the ‘Forecast’, it is good for the currency.
Retail Sales Ex Autos:
Retail Sales Ex Autos measures change in the total value of sales at the retail level, excluding automobiles, Automobile sales account for about 20% of Retail Sales, it tends to be very volatile and distort the underlying trend.
The core data is therefore thought to be a better gauge for the spending trends, Info is released monthly, about 50 days after the month ends.
Aud/Cad currency pair has been trading within an area of support and resistance zone known as descending broadening wedge pattern, This is a bullish chart pattern (said to be a reversal pattern) which is formed by two diverging bullish lines.
However, the pair made a good oscillation between the two upward lines. The upper line is the resistance line, the lower line is the support line, which is confirmed/valid from our previous analysis.
It further played out as speculated thus testing the diverging support line, from the chart above, we can observe that the pair broke the diverging resistance line during last week’s trading session.
The stochastic oscillator is heading to the oversold level which primarily indicates that the pair will continue its bullish move.
Moreover, since the descending broadening wedge pattern has been broken, it is expected that aud/cad currency pair will retest the broken resistance, probably price level 0.92425, then continue its bullish move if the employment change on Aud is greater or equal to the forecast.
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