The AUD/CAD is an interesting pair to watch over the coming days. Although at the moment the Bank of Canada is clearly more hawkish than the Reserve Bank of Australia, the recent sell-off in oil prices has dented the appeal of the Loonie a little. Meanwhile economic data from Australia has improved – as indicated, for example, by the 32,800 jump in October employment – while hopes have risen that the nation’s largest trading partner, China, will soon end its trade dispute with the US. As a result, the Aussie has bounced back a little. Whether or not the AUD/CAD will be able to sustain its rally will now depend to a large degree on the US-China trade talks and the direction of oil prices.
But for the time being, the AUD/CAD is displaying bullish characteristics and the path of least resistance remains to the upside. Indeed, we have seen some bullish technical developments of late. Among other things:
- It has formed a higher high above old peak of 0.9490,
- price has risen back above the 2017 low, and
- the 21-day exponential moving average has risen above the 50-day simple moving average with both MAs also having positive slopes
Thus, price action is objectively telling us that the trend has indeed been bullish. Going forward, traders may wish to watch the following technical levels closely:
- 0.9665 – old S/R and 200-day SMA confluence
- 0.9810 – 61.8% Fibonacci retracement
- 0.9490 – key short term pivotal level, below invalidates bullish idea
- 0.9565-0.9580 next support area (old resistance)
- 0.9335 point of origin of breakout
So, in a nutshell, the path of least resistance is to the upside for the AUD/CAD and we could see further short-term gains. But we would drop our bullish view in the event price breaks back below the pivotal level of 0.9490, or shows a clear reversal sign at higher levels first.
Source: eSignal and FOREX.com.
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