AUD/CAD "SHORT" ANALYSIS - SELL @ 0.9900 & 1.000

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The AUD / CAD pair has been trending upward for more than 12 weeks. The pair is now approaching stiff resistance zone at 0.9850 – 0.9920. The weekly chart below shows price action over a 5-year time horizon. In July 2008, the pair advanced to the 0.9850 region (Top1) and then pulled back over 2600 pips! .The next advance topped out around the same region - just over 0.990 (Top2). After the 0.990 top in November 2009, prices declined temporarily and then started advancing again in June of 2010. AUD CAD is now approaching the same resistance zone with potential for a reversal and the formation of a “triple top”. A “triple top” usually precedes steep declines or a change in trend. Whatever the case (whether it declines or AUD CAD is at the cusp of a change in long term trend), the risk reward profile of this trade makes it a very attractive short candidate.

Trade Plan:

• Entry:

Short 2 Standard Lots of AUD / CAD following the price points below

- Sell 1 lot of AUD / CAD @ 0.990

- Sell the 2nd Lot of AUD / CAD @ 1.000

Average Entry Rate (if both entry points are triggered) = 0.950



AUD CAD has a $9.7 value per pip for each standard lot

• Exit / Trade Profit:

Using “last in, last out” technique.

Take Profit on 1 lot @ 0.8600 (1400 pip potential)

Take Profit on 2nd lot @ 0.8450 (1450 pip potential)

• Exit / Risk Control:

Stops for the 2 units should be placed at 1.0100 (- 150 pip potential).

• Trade Invalidation:

This trade should be canceled if prices dip below 0.93 before hitting our entry point.

The Japanese Yen: BOJ Intervention?

On July 22nd, I shared my "Buy analysis" of USD JPY at 86.93 and 85 on the argument that the Japanese economy and BOJ could not condone a stronger Yen for sustained period; and the Yen at the 85 , 86 level to the US dollar creates the risk of sovereign intervention. The Yen strengthened  to 85 against the US dollar and then more. I was rather surprised to see the Yen break 84.00 and that break triggered our stops to close that trade at a loss. Between July 22nd when I released the Yen analysis and now, the rhetoric from the Bank of Japan threatening intervention had been deafening but speculators kept pushing the Yen higher (USD JPY lower). Today, the Yen made a new 15 year high at around 82.87 against the US dollar and it seems the Japanese have just had enough of this Yen strength.  As I write, the Yen is being sold aggressively and i'm almost convinced the Japanese authorities are intervening.  I am looking for news from Finance Minister - Noda or the finance ministry to confirm rumours of intervention after which, I'll look for a pullback to get on the long side.