AUD/CAD Targets Top of Range

AUD/CAD Targets Top of Range

AUD/CAD Targets Top of Range

For the past week we’ve seen AUD/CAD consolidate between a relatively tight 0.9435 and 0.9535 trading range. This type of performance tends to happen when commodity currencies move in the same direction and / or the U.S. dollar dictates trading. While further range trading is possible, we also think that AUD/CAD is prime for an upside breakout. Fundamentally, the smaller decline in Chinese imports, rise in Chinese steel demand and less dovish RBA is positive for AUD. In contrast, the deterioration in Canadian manufacturing and housing market activity along with USD/CAD nearing oversold levels means that even if CAD rises further, its gains should AUD.

Technically, AUD/CAD has done a great job of holding above the 20-day SMA at 0.9435. If this level is broken then a move to the May low near 0.9335 becomes likely. However if AUDCAD breaks above 0.9540, the 61.8% Fib retracement of the 2015 year end rally then 96 cents will be the target. Either way, we are at least looking for a move to the top of the range at 0.9535 before any of that happens.

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