Few weeks ago I wrote a post about possible parity of Canadian Dollar and US Dollar. I didn’t have any strong opinion on the subject, other than pointing out that Bank of Canada stopped complaining about strong CAD, which could have been a silent nod of approval for Loonie appreciation. It happened today, when USD-CAD dipped under the 1.0000 mark. No additional progress was made, but price still lingers within few pips of parity. Hard to say if CAD is going get even stronger, but hourly chart of USD-CAD is not making signs of reversal. Not yet, at least, so down trend is still prevailing force.

On the subject of parity, more and more voices are heard that the other Dollar, Australian, will also reach this level. Several sources published these kind of opinions, no doubt influenced by the rate increase announced today after RBA policy meeting. All this hinges on ever rising rates, and continued money flow into the Aussie. In my view, though, this will only take place if global economy keeps humming along at steady, even increasing pace. Any speed bumps, be it political or economic, will put the process off, or even reverse it. The way things are now, I don’t think we’ll see AUD-USD parity this summer. Very long term? Yes, likely.

With response to news from Australia unpredictable, I stayed away from Aussie pairs. AUD generally speaking gained ground, but the size of rally varied from pair to pair. A lot depended on how other currencies were effected by their own domestic news. At any rate, I paid more attention to other pairs, just like the EUR-JPY mentioned in last post. Price fell through my first possible sell point, but didn’t make small correction which I wanted to see, so no trade there. Had to wait longer and eventually selling opportunity presented itself.

Minor low was made at just above 126.20 followed by a small bounce. Short entry happened on new low, or at 126.20, targeting 60 pips. And that’s what the trade brought. Essentially, the same transaction I wanted to do initially, only sell point had to be moved lower, adjusting to market behavior. Of course, I missed about 60 pips of additional profit, but that’s just how things are in trading. Have to be happy with result and not dwell on what could have happen if…

Japanese Yen made some gains against few currencies, while others only now form possible reversal. By “reversal” here I don’t mean major trend turn, but rather correctional move within larger time frame. Reversal on hourly chart, like CAD-JPY, may only turn out to be normal pull back when viewed on intermediate term. The beast, on the other hand, had a more substantial sell off. Since the bearish moves normally come in two down price swings, we might have another leg down.

If this was to happen, this 4H chart shows probable entry point and objective. This would fit nicely into even larger picture, should price retrace all the way down to about 139.50. As of this moment I’m not committed to a specific sell level. It will have to be monitored more closely on hourly chart, but in a broader term, move under 142 should be seen as a sell opportunity. If it takes place.

Mike K.