The Australian Dollar could be in for a ride this week as the Reserve Bank of Australia (RBA) meets on Tuesday to discuss interest rates. Expectations are for unchanged at 0.25%, however comments need to be watched for any talk on the current strength of the Australia Dollar, which has been on a tear against most currencies since mid-March. In addition, traders need to be aware of any adjustment to QE. At the June meeting, the RBA said that although the increase in coronavirus cases has slowed quicker than anticipated, they will not move the cash rate until inflation meets their 2%-3% target and employment has picked up significantly. The mostly likely scenario is for no change to policy, however any kind of unexpected tweak could move AUD.
On Friday, Canada releases their employment change for June. Expectations are for +700,000 vs May’s increase of +289,600. The unemployment rate is expected to fall to 12% vs May’s 13.7% reading. As with the US NFP released last Thursday, there could be a wide discrepancy between forecasted and actual, as it has been difficult to determine how to classify certain workers. Canada has done a relatively good job containing the coronavirus and the country is not having large spikes throughout the country, as with the US. They continue to keep the US/Canadian border closed so as not to cause new outbreaks.
On a weekly timeframe, AUD/CAD has been moving higher off the March 2020 lows and has stalled at the 61.8% Fibonacci retracement level from the highs in March 2018 to the March 2020 lows, near .9435. The pair is forming an ascending triangle near the same level, however the 200-week moving average sits above at .9554 and there is horizontal resistance near .9637. If the pair does break higher, the 200 DMA is still roughly 120 pips higher from the 61.8% Fibonacci retracement level, so there is plenty of room to still run higher.
On a daily timeframe, we can get a better picture of the ascending triangle forming at the previously mentioned 61.8% retracement level. Once that level was hit, the RSI was in overbought territory and as price traded sideways, the RSI was able to pull back into neutral territory. This now gives the RSI room to run higher with price if it does break out. The target for an ascending wedge is the height of the triangle added to the breakout point, which would be near .9775. Support is at the upward sloping trendline near .9280. Next support is the 50% retracement and horizontal support near .9174.
Source: Tradingview, FOREX.com
Currently, keep on eye on the weekly chart for resistance levels and the daily chart for support levels. There are opportunities for volatility in AUD/CAD this week, with the RBA meeting on Tuesday and the Canadian Employment Change on Friday. Add in the possibility of an unexpected increase in coronavirus cases and a slow week (no other major economic events), and this could be the pair to watch!