Good evening team,
Markets are looking extremely stretched to the upside across all USD and JPY pairs. Tech stocks continue to lead the charge and are currently surging higher as we speak. Just another day in the land of unlimited liquidity from central banks. The money printing frenzy continues and markets are completely disconnected from fundamental data. Any bed news coming from the press regarding the China US tensions, corona virus or economic damage does not matter, markets continue to grind higher.
Risk sentiment is very much risk on, however we could be witnessing a short squeeze in the market. Sellers are being taken out left right and centre. This is where traders need to be very careful and wait for the correct opportunity.
We are looking for a position on the AUD against the CAD. The reason we are looking too short the AUD is due to the price of copper.
AUD has been tracking copper extremely closely. Copper is a sign of global economic health. When the economy is running well copper demand is high as it is used in most electrical goods and building material. High prices is a positive sign.
Copper has run into a very interesting area which may attract profit taking and some sellers. This suggests if copper takes a fall the AUD will also.
Copper Daily Charts
Checking the copper charts you can see the last sizeable pull back was on the 11th of June. On this day the AUDUSD also dropped 300 pips over a 3 day period. Copper has now reached the top of the channel formation and a major resistance zone.
AUDCAD – 4 Hour Charts
Price action is breaking out of a wedge formation, this suggests a pull back is potentially taking place. We are now looking to enter a short SELL STOP position.
Trade Setup: SELL STOP – Entry price 0.9403, stop loss 0.9493 and take profit left to run. Target zone is between 0.9303 and 0.9220.
Stop loss: 90 pips
Take Profit: 100-183 pips