A long-term forex correction play seems to be materializing on AUDCAD’s daily time frame, as price is moving up to test parity once more. This lines up with an area of interest, as plenty of sell orders are probably located in that area.
Stochastic is indicating overbought conditions, which means that the forex correction is almost over and that Aussie bears might take control of price action. In addition, a shallow bearish divergence can be seen, with price making lower highs and stochastic drawing higher highs.
Forex Correction Levels
With that, the selloff could resume around parity, which is close to the 61.8% Fibonacci retracement level. If this area holds as resistance, AUDCAD could fall back to the previous lows near the .9400 major psychological support in the coming weeks.
Bear in mind though that the continuous oil price decline sparked this large forex correction for AUDCAD and may keep the Canadian dollar under heavy selling pressure. Some industry analysts have remarked that oil prices are seeing a bottom and it may be a prime opportunity to buy the commodity and the positively-correlated Canadian dollar.
A break above parity, however, could confirm that further gains are in the cards for the pair and that the forex correction has probably been invalidated. After all, data from China has come in slightly stronger than expected and may continue to keep the Australian dollar afloat in the coming months. Australia’s is China’s number one trade partner, with a pickup in demand from China likely to support Australia’s commodity export industry.
Waiting for reversal candlesticks or further confirmation around the 61.8% Fib or 1.0000 could be a prudent course of action and keeping a wide stop for this volatile pair could give the trade more leeway. Trailing the stop could also be a good way to lock in profits as price moves south.
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