AUDCAD Correction Play (Sept 3, 2015)

From there, price bounced and showed signs of a potential pullback to the broken support zone, which might now hold as resistance.

In addition, the broken support lines up with the 38.2% Fibonacci retracement level, which might be enough to keep gains in check. A higher pullback could last until the 61.8% Fibonacci level, which coincides with the moving averages. Note that these just made a downward crossover, signaling that the path of least resistance is to the downside.

Meanwhile, RSI is on the move up for now, indicating that buyers are in control of price action and that a correction is underway. Stochastic hasn’t quite reached the overbought zone yet but is starting to cross down, hinting that a shallow pullback is in the cards.

Earlier today, Australia printed mixed reports, with a 0.1% drop in retail sales versus the projected 0.4% uptick and a smaller trade deficit of 2.46 billion AUD versus the projected 3.10 billion AUD shortfall. This is also smaller compared to the earlier 3.05 billion AUD deficit, although this was already downgraded.

As for Canada, the main event risk this week is its jobs report due tomorrow. The economy probably added 2K jobs in August, weaker compared to July’s 6.6K gain but likely enough to keep the jobless rate steady at 5.8%. For today, the trade balance is due and it might show a larger deficit of 1.4 billion CAD compared to the previous 0.5 billion CAD shortfall.

Oil prices could also direct Loonie price action in the coming days, as OPEC is reportedly ready to discuss adjustments in prices and production levels. Any reduction in supply could allow prices to recover, which might lift the positively correlated Canadian dollar in the process.

By Kate Curtis from Trader's Way