The AUDCAD started to move sideways after reaching its resistance area marked in light grey in the above H4 chart. This currency pair arrived at this level following a powerful rally which started with a breakout above its support area which is visible in light blue. The Bollinger Band indicator provided a strong support level for the rally as the AUDCAD was able to advance on two occasions after reaching the lower band.
The current sideways trend is expected to lead to a breakdown in this currency pair as forex traders are set to realize floating trading profits by closing existing short positions. The AUDCAD is trading inside of its resistance area, but between the middle band and the lower band of the Bollinger Band indicator which could lead to a breakdown below its current resistance area and invite new net short positions. A sharp sell-off, potentially fueled by fundamental data, is expected.
Forex traders are advised to enter short positions at 0.9760 and above in order to be well position for the expected profit taking sell-off in this currency pair and a break in the up-trend. Conservative forex traders should wait for price action to break down below the resistance area which will increase selling pressure in this currency pair. A take profit target of 0.9320 has been selected for a potential trading profit of 440 pips.
Forex traders should protect this trade with a stop loss level at 0.9900 for a potential trading loss of 140 pips which will result in a Risk-Reward (RR) ratio of 3.14.
Short @ 0.9760
TP @ 0.9320
SL @ 0.9900