With my nearly twenty year background in commodity futures it’s not surprising to me that I often gravitate to “commodity currencies” like the USD/CAD and AUD/USD. I love the synergy these two pairs have with crude oil and the commodities index, respectively.
The price action in crude oil as prices are finding support above the key 80.00 level is pushing the Canadian Dollar higher against the U.S. Dollar. The value of the Canadian Dollar and strength of the Canadian economy has a strong correlation to the price of crude oil. Consider that a strong crude oil market is also usually a reflection of a weaker U.S. Dollar. So the impact on the USD/CAD is double: The weaker U.S. Dollar strengthens crude oil prices while allowing the USD/CAD to trade lower.
The USD/CAD weakness has formed a Channel Down pattern and prices have recently broken the 1.0100 level. This puts the USD/CAD under 100 pips from parity. This means the descent from current prices will be watched much more closely than any other sell off. The Channel Down support level was broken as prices pierced 1.0100 and this triggered a pattern breakdown. That makes this Channel a continuation pattern. An alternate trend-following set up for this pattern could be a short sell off the downtrend line resistance at 1.0124.
The Continuous Commodity Index is slightly stronger mainly because of the weakness in the U.S. Dollar today. The dollar broke the 80.00 level to the downside after rallying above it during Monday’s session. Today’s dollar weakness is allowing commodities to rally. I also want to add that the indecision in the dollar's trend day to day has made trading the dollar correlated pairs (EUR/USD, USD/JPY, GBP/USD, USD/CHF) a challenge on 30 and 60 minute time frames. I think that’s why my preference over the past weeks has been to focus on four hour and five minute charts - playing either the very short term or very long term intraday moves. But comm-dollars like the USD/CAD and AUD/USD have presented exceptions to this.
The AUD/USD has benefited from the commodities movement and trended higher across both the 30 and 60 minute time frames. The Rising Wedge on the 30 minute chart is setting up with a strong uptrend and is pulling back to the uptrend line support of the pattern. This would be a trend following entry set up by a pullback or correction to support.
The 60 minute chart of the AUD/USD is also trending higher within a rising wedge pattern.
Both the 30 and 60 minute charts are showing support and a possible swing buy trigger at 0.9215. A move higher on the AUD/USD would depend upon continued dollar weakness and commodities strength.
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