AUD/CAD to 97 Cents?

AUD/CAD to 97 Cents?

AUD/CAD to 97 Cents?

In the past 48 hours we’ve seen a major breakdown in AUD/CAD. After trading within a tight 150-pip range for the past month, AUD/CAD dropped to its lowest level in 3 weeks and losses accelerated on the back of higher oil prices and stronger Canadian data. Over 40K jobs were created in the month of March, nearly all of which were full time. This was the largest amount of growth in 5 months and helped to drive the unemployment rate down to 7.1% when economists anticipated a steady reading. The participation rate also held steady, rounding out the report. The Bank of Canada meets next week and the last time we heard from them, they expressed very little concern about the strength of the currency. Since then oil prices have recovered and the CAD is trading near the same levels. The Australian dollar on the other hand is nearing a top. The Reserve Bank recently expressed concerns about the strength of the currency and the impact of global monetary policy. Looking ahead, AUD will be most sensitive to Chinese data while CAD traders will be focused on oil and the BoC.

Technically, the recent decline in AUD/CAD has taken the pair below its recent range low as well as the 50 and 100-day SMA. We believe that this is technically significant and opens the door for a move below 98 cents. The first area of support for the pair is 0.9780, the 38.2% Fibonacci retracement of the 2015 to 2016 rally. It also coincides with spike lows in February. If this level is broken, then it should be smooth sailing down to 97 cents. Resistance is at the 50 & 100-day SMA cross and the former breakdown level of 99 cents.

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