AUDCAD recently broke below a key support zone at the .9800 major psychological level and appears to be pulling up for a forex market correction. Price just bounced off support at the .9600 major psychological level and my need to gain more selling pressure before creating new lows.
The 50% Fibonacci retracement level lines up with the broken support area, which might act as forex market resistance moving forward. If so, AUDCAD could test the recent support at .9600 or perhaps head lower to the next support area at the .9400 level.
Forex Market Outlook
Stochastic is moving down, indicating that Aussie sellers might take control of price action soon. However, if buying pressure persists, the pair could head to the previous highs around the 1.0000 major psychological level.
Fundamentals are both bearish for the Australian dollar and the Canadian dollar, as both the Reserve Bank of Australia and the Bank of Canada have decided to cut interest rates. However, it seems that oil prices are starting to bottom out, which might lend more forex market upside for the Canadian dollar in the near term.
Earlier today, Australia reported a weaker than expected retail sales figure, as consumer spending rose by only 0.2% in December versus the projected 0.3% gain. Take note though that Canada has also recently seen a weaker than expected report, as its Ivey PMI figure slipped from 55.4 to 45.4, indicating industry contraction.
Canada is set to print its trade balance later today and possibly show a wider deficit of 1.2 billion CAD from the previous 0.6 billion CAD. A weaker than expected reading could push AUDCAD higher while a stronger than expected report could allow the selloff to resume. Waiting for the actual release or for reversal candlesticks to form might be a more prudent strategy, as the chances of breaking to the upside or resuming its slide seem equal.
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