The AUD/CAD pair fell hard during the session on Wednesday again, as we continue to grind our way lower. This is an interesting chart, simply because we are bouncing along the 0.95 level, an area that is obviously supportive based upon a hammer that we have seen form there a couple weeks ago. On top of that, it is a large, round, psychologically significant level as well, and of course that will always attract traders.
I think that this downtrend is a bit of a perfect downtrend, and as a result it makes sense that we could continue much lower. If we managed to break a fresh new low, just below the 0.95 handle, I think that this market will go much lower, possibly as low as 0.90 before the move is all said and done. On the other hand, we could possibly bounce from here, but I see a lot of resistance at the 0.98 handle, and that would simply be a continuation of the consolidation that we've seen over the last couple of weeks.
This is a one-way trade.
Both of these currencies are obviously commodity currencies, with the Canadian dollar of course being tied to the oil markets, and the Australian dollar being tied to the gold markets. With the way that oil has been behaving over the last couple of days, it makes perfect sense that the Canadian dollar continues to strengthen against the Aussie dollar which of course is tied to the gold markets, which of course look absolutely horrible.
Selling this pair is essentially going long oil, and shorting gold at the same time. That is a trade that is worked out quite well since April as you can see on this chart, and as a result I believe that this market will continue to fall down before too awfully long. As far as buying is concerned, I would be very leery of going back, and as a result really don't see doing that until we get above the parity level on a significant close, possibly even on the weekly chart. Of course, I still think that rallies will be sold, and parity should be massively resistant. It's because of that that I think that the weekly close above that level of course would be a smashing of the momentum that we've seen for a while. However, I should state that I highly doubt that's going to happen.