AUD/CAD Outlook Bearish on Fundamental, Technical Considerations
AUD/CAD Outlook Bearish
- Canadian economic data may outperform, sinking AUD/CAD
- AUD/CAD may extend losses given technical warning signs
- 2016 lows could catch the pair if it falls, holding as support
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AUD/CAD Fundamental Bearish Outlook
The Canadian Dollar has in recent days gained ground against the Australian Dollar, making progress that is in line with one of my top trading opportunities for this year. In a world where slowing economic growth is causing major central banks to err on the side of caution, Canadian GDP surprised to the upside in January. This was then followed by an RBA rate decision that sunk the Australian Dollar.
I am still hanging on to my fundamental anticipation that the BoC will essentially be one of the less dovish central banks. Governor Stephen Poloz recently reiterated that they have a data-dependent approach for monetary policy. As of late, Canadian economic news flow has been tending to outperform relative to economists’ expectations. This may lead to further declines in AUD/CAD.
AUD/CAD Technical Analysis
In the short term, technical signs warn that AUD/CAD may aim for 2016 lows next, at 0.9327. This comes after a break under the rising support line from March on the daily chart below. Moreover, the dominant downtrend from late November could be on the verge of resuming. A more interesting picture is revealed if you were to zoom in on the 4-hour chart.
AUD/CAD Daily Chart
Below, a Head and Shoulders bearish reversal pattern has not only formed, but there has been a subsequent break under the neckline of the pattern around 0.9484. Meanwhile, a descending range of resistance (parallel blue lines on the chart) seems to be guiding the pair lower.
Combing the former with the latter creates a margin of error (red triangle area). That may be well-defined resistance should prices turn higher ahead. You may follow me on twitter @ddubrovskyFX for updates in the Canadian and Australian Dollars. I will be closely watching this pair ahead.
AUD/CAD 4-Hour Chart
ChartsCreated in TradingView
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--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.