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We’re seeing a counter trend move in AUD/CAD that could have legs with potential catalysts coming soon from both the RBA and Canadian manufacturing data.

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Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Forex Calendar:

  • Reserve Bank of Australia meeting minutes at 2:30 am GMT (Aug. 20)
  • Swiss trade balance at 7:00 am GMT (Aug. 20)
  • German PPI at 7:00 am GMT (Aug. 20)
  • U.K. CBI industrial orders expectations at 11:00 am GMT (Aug. 20)
  • Canada manufacturing sales at 1:30 pm GMT (Aug. 20)

What to Watch: AUD/CAD

AUD/CAD 1-Hour Forex Chart
AUD/CAD 1-Hour Forex Chart

We’ve got a very light economic calendar ahead for FX, but with what we’ve got, there may be an opportunity for short-term pips with the price action in AUD/CAD. In the upcoming session, the RBA’s latest meeting minutes and Canada’s manufacturing sales data are the most likely market movers, and they could shake things up for both the Aussie and Loonie.

Looking at the pair’s one hour price action above, we can see a pattern of higher ‘lows’ forming since last week, while the area just under the minor psychological level of 0.9050 has fended off the bulls twice so far this month. We’re also seeing a technical argument for another leg higher with bullish divergence in the past session between price action (lower ‘low’) versus the stochastic indicator (higher ‘low’).

So, with risk sentiment generally bullish today off of fading recession fears and stimulus news from China, the Aussie is likely to outperform the Loonie very short-term. If you’re a bull, you’ve got risk sentiment and technicals on your side for a potential move higher to the resistance area around 0.9050. This is within the daily ATR range of around 60 pips, so if the pair does move higher, it could hit that target in a few days or so with the right catalysts (e.g., less dovish RBA minutes, weak CA manufacturing sales data/weak oil prices).

For AUD/CAD bears, a combination of very dovish RBA minutes and positive CA manufacturing sales may be enough to break the short-term rally higher and take the pair back to the longer-term trend lower, an environment that has been going pretty strong for the last year or so. A break below the rising ‘highs’ is the technical signal to start paying attention and planning both a short-term and long-term strategy.