The forex trading outlook for AUD/CAD fell again today, but the downside seems limited for the pair, where both currencies are influenced by commodity market prices, but more so the Aussie dollar.
The price action has printed a potential reversal pattern but traders will still have to wait for confirmation before taking action. The bias is bearish right now so patient traders wait for fresh trading opportunities to come into view rather than rushing in to force the trade.
Forex trading outlook: Aussie dollar weak short term
The Aussie is weak in the short term. That position has been reinforced by retail sales figures that underwhelmed, dampening forex trading buying interest. Australian Retail Sales indicator increased 0.1% but that against the 0.4% expected by analysts and also compares unfavorably when compared to the 1.1% growth in the prior April reading period.
The Australian Flash Manufacturing PMI, Flash Services PMI, and the Goods Trade Balance data will all be released on Wednesday, so expect some movement around those reports. Also, the Canadian retail sales figures could bring heightened price action in this pair.
The Australian Bureau of Statistics reported the unemployment rate at 5.5 per cent. The data from the previous month showed a sixth consecutive fall in joblessness. These are positive signs that the global recovery is on track and Australia is certainly a beneficiary of rising commodity prices too.
Also, the economic positives are coming into view despite the disputes Australia has been having with its largest trading partner China – the main buyer of many of Australia’s commodity exports.
AUD/CAD technical analysis
We see AUD/CAD forex trading outlook becalmed, with the price moving sideways in the short term. Unfortunately, it has failed to stabilize above the downtrend line, signalling strong selling pressure. It could resume its decline as long as it stays below the weekly pivot point (0.9334).
The forex pair is developing a potential Inverse head and Shoulders pattern. Still, this reversal pattern could be activated only if the price makes a valid breakout above the 0.9393 level.
This formation could be invalidated if AUD/CAD makes a new lower low, to drop and close below 0.9288 low.
But the US dollar may have the final say this week, with Fed chairman Jerome Powell testifying before Congress on Tuesday, which could begin a chain reaction of volatility for the greenback and other currencies.
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Read More: AUD/CAD Inverse Head and Shoulders