Analysis of the AUD/CAD pair (Australian dollar against the Canadian dollar)
Want to stay away from the Fed, Bank of England and ECB this week? What about the AUD/CAD pair? Since October 2022, the Australian dollar has been trending higher against the Canadian dollar, and the AUD/CAD pair recently reached the 61.8% Fibonacci retracement level.
This week there will be several high-profile central bank meetings that you may have already heard about. On Wednesday, the FOMC meeting will take place, and quotes are expected to rise by 25 basis points. On Thursday, the Bank of England will meet and its shares are expected to rise by 50 basis points.
Also on Thursday, the European Central Bank will meet at which it is expected to raise rates by 50 basis points. These are all firm market beliefs, so any deviation from these expectations could lead to extreme volatility in the US dollar, British pound sterling or euro.
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In addition, forex currency traders will be following related announcements and press conferences to see what each central bank can do at its next meeting. It can also lead to significant volatility in the markets.
Do you want to stay away from the aforementioned currencies? Why not look at AUD/CAD?
The RBA does not meet until February 7, and the Bank of Canada held a meeting last week. Therefore, the AUD/USD pair may not be as volatile as the USD, GBP and EUR pairs.
On a weekly basis, AUD/CAD traded in an orderly downward channel from its post-pandemic high in February 2021 at 0.9994. In October 2022, the pair hit a low of 0.8599, bouncing off the lower channel trendline.
Since then, the price of the AUD/CAD pair has been rising in Forex. In early December 2022, the pair briefly broke above the upper channel trend line, but was stalled on a 50% pullback from February 2021 highs to October 2022 lows near 0.9297.
The pair briefly pulled back to 0.9043, but since the week of December 19, 2022, the pair has risen aggressively. The pair broke the 61.8% Fibonacci retracement level at 0.9461 last week and has been trading near that level ever since.
AUD/CAD weekly chart
Source: Tradingview, Stone X
On the daily chart, when the price of the AUD/CAD pair moved away from the lows of October, an AB=CD pattern formed, in which the price movement of AB should equal the price movement of CD. If the price continues to approach the target, it should first overcome the resistance at the Jan 26 highs at 0.9549.
Above this level, the price may move towards the target and horizontal resistance starting from the April 2021 highs at 0.9759. After that, resistance is negligible up to February 2021 highs at 0.9994. If the price pulls back, the first support is at the Jan 19 low at 0.9281.
Below, AUD/CAD could fall to the 50-day MA at 0.9215 and then to the previous channel’s upper trend line around 0.9170.
AUD/CAD daily chart
Source: Tradingview, Stone X
If Forex traders are looking for a currency pair that may have less volatility this week than the USD, Pound or Euro pair, then AUD/CAD might be a good candidate.
Since October 2022, the Australian dollar has been trending higher in forex against the Canadian dollar, and the AUD/CAD pair recently pulled back after hitting the 61.8% Fibonacci retracement level from February 2021 highs to February 2021 lows. The CAD pair may continue rising and reach the AB=CD target at 0.9749.
Joe Perry, CMT, FOREX.com » Official site
Disclaimer: The information and opinions contained in this report are for general information only and do not constitute an offer or solicitation to buy or sell any currency contracts or CFDs. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness and accepts no liability for any direct, indirect or consequential damages that may result from anyone relying to such information.