AUD/CAD drops to test key support
Fawad Razaqzada July 19, 2016 10:50 PM
<p>This is a quick update about the AUD/CAD article we posted on Wednesday of last week (click HERE for details). Although oil prices have remained […]</p>
This is a quick update about the AUD/CAD article we posted on Wednesday of last week (click HERE for details).
Although oil prices have remained weak, the Canadian dollar has managed to hold its own relatively well compared to some of the other commodity currencies, with the Aussie and kiwi dollars both falling sharply in recent days on speculation about further rate cuts from their respective central banks. In contrast, the Bank of Canada delivered a more hawkish-than-expected policy statement last week, suggesting that it has moved to a more neutral stance. This week’s key event risk for the AUD/CAD pair is Canada’s CPI figures released on Friday, as well as the on-going volatility in oil and other commodity prices.
The resulting price action since our last update has been consistent with our expectations. As can be seen from the updated chart, below, the AUD/CAD has indeed falling to test the key support region in the 0.9725-0.9750 range. As previously mentioned, this area had been resistance in the past and it is also where the 200-day moving average converges with the shallow 38.2% Fibonacci retracement against the most low from May.
As you would expect, the cross has bounced off this 0.9725-50 support range today due to a combination of profit-taking from the bears and reloading of long positions from the bulls.
What price does next could have a big say in terms of near-term direction.
(1) A potential break below this 0.9725-50 support region could potentially lead to further follow-up selling pressure towards 0.9570/5 area where the 61.8% Fibonacci retracement level meets 50-day moving average.
(2) Conversely, if the 0.9725-50 support range holds firm and price moves above the next potential resistance at 0.9795, then it may rise towards the next reference point at 0.9870 or even revisit the prior highs.
Conservative traders may therefore wish to wait for price to make its next move before taking a view on direction.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.