The Australian dollar found strength versus its Canadian counterpart during the Tuesday European afternoon session as a raft of disappointing data put pressure on the AUDCAD. Does the technical bias support the fundamental momentum, and what are the levels to watch?
Let’s take a quick look at the data. The two headline releases were the Canadian housing starts and Canadian building permits. Both figures missed expectations, with the housing starts figure coming out at 156.8K versus a consensus forecast of 191.0K, and the building permits figure reported at -11.6% versus a consensus forecast of -3.0%.
The misses broke the AUDCAD free of its April range, with a close above range resistance at 1.0211 validating an upside technical bias. If the momentum holds, look for an initial upside target of previous support at 1.02351.A close above this level would bring 1.0252 into play, and beyond that, March highs at 1.0277.
Stochastics read overbought, suggesting the potential for a small correction. Look for a failed retest of broken resistance at 1.0211 to confirm the upside technical bias.
If the technical bias fails, and a retest breaks the pair back into its weekly range, look for the Australian dollar to return some of its gains as the day matures. An initial downside target would be mid range support at 1.0182, which coincides with the 200 period moving average. A close below this level would bring range support into play, with 1.0151 being the level to watch.
Keep in mind that there are a couple of market moving Australian fundamental releases set for Wednesday morning that could reverse sentiment. Westpac is set to report its monthly consumer sentiment report, and the Australian Bureau of Statistics will reveal the MoM home loans data for March, forecast at 2.0% growth versus a flat previous release.
To contact the reporter of this story; Samuel Rae at Samuel@forexminute.com