AUDCAD recently broke past a consolidation pattern on its long-term time frames and is currently making a pullback. 

Price is finding support around the 50% Fibonacci retracement level, which lines up with the former resistance around the .9550-.9600 area.

Stochastic is already indicating oversold conditions, which means that a bounce could take place soon. However, RSI is on the move down so there may be a bit of selling momentum left, possibly to trigger a test of the 61.8% Fib near the 200 SMA.

The 100 SMA is above the 200 SMA for now, confirming that the path of least resistance is to the upside. A bounce from the Fib levels could lead to a rally up to the previous highs near .9750 or higher. A break below the 61.8% Fib could lead to a move towards the next support near the .9400 major psychological level.

Earlier today, Australia reported a drop in its NAB business confidence index from 8 to 4, reflecting weaker optimism. Prior to this, China printed stronger than expected medium-tier data, suggesting that Australia’s top trade partner has seen improvements.

Australia’s Westpac consumer sentiment data and its quarterly wage price index are still lined up for tomorrow, along with China’s top-tier industrial production and retail sales figures. Strong data could trigger a bounce for AUDCAD during the release of these reports while weak results could keep the selloff going.

As for the Loonie, data from Canada has been slightly weaker these days, and traders are expecting to see more declines once the recent oil price drop kicks in. Canadian manufacturing sales data is due on Friday and analysts are expecting to see a 2.1% rebound, which might be enough to keep the Loonie afloat. However, a huge disappointment could mean another round of losses for the Canadian currency if traders start buzzing about a potential BOC rate cut.

By Kate Curtis from Trader’s Way