“INDICATOR OF THE DAY” - YEARLY HIGH-LOWS
A few days back we recommended looking to short the cross with daily studies overdone and the need for a healthy corrective pullback. The trade however never triggered and the market was left consolidating by the highs until today. We have finally seen a break of the previous 2009 highs from January, but with this level now taken out, the risks from here are for a decent sized pullback.
Aud/Cad: Quite often, when the market nears a key yearly high or low it is not uncommon for this level to be tested and taken out. However, when the market nears the yearly high or low and is already overextended, we will look for the level to be taken out before immediately initiating a counter-trend trade. The reasoning for this is that the market is already overdone with clearing stops beyond the yearly high-lows as the only justification for continuation of the stretched move. As such, in the above example, selling Aud/Cad at 0.8690 could very well yield attractive returns over the coming sessions.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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