AUDCAD could be in for a breakout soon, as price is approaching the peak of its symmetrical triangle pattern on the 4-hour time frame. 

Stochastic is pointing down, indicating that a downside break is likely, although price might still go either way.

An upside break past the .9800 major psychological resistance could mean roughly 600 pips in gains for the pair, as the triangle is approximately of that height. Similarly, a downside break below support at the .9700 major psychological support level could lead to around 600 pips in losses.

In terms of fundamentals, the path of least resistance is to the downside since traders still expect the RBA to cut interest rates in their next meetings. Even though the Australian central bank decided to stay put in their rate statement this week, weak data from Australia suggests that further easing moves are still on the table.

Meanwhile, the Canadian economy also isn’t faring so well, as the impact of the oil price slump has been negative on their commodity-dependent growth. However, the North American country has been drawing some support from its better-performing neighbor and trade partner, which is the U.S. economy.

With that, strong data from the U.S. seems to be supporting the Canadian dollar recently, and the upcoming NFP release should add to volatility for this pair. Stronger than expected data could mean more gains for the Loonie and a potential break below the triangle support.

Other event risks for this setup include the BOC interest rate statement, during which policymakers are likely to keep rates unchanged for the time being. Reassuring remarks from central bank officials could also keep the Loonie supported while changes in oil prices could also influence price action.

By Kate Curtis from Trader’s Way