AUD/CAD Poised for Breakout as Sideways Trend Faces Crucial Test

Tuesday Market Overview:

FX markets remain calm while stock markets rise, creating a favorable environment for carry trade transactions. In such an environment, the US dollar benefits from high liquidity due to its elevated interest rates, helping to halt its recent losses. Meanwhile, oil prices continued their downward trajectory on Tuesday following a storm that hit a US oil production hub in Texas, causing less damage than expected. These developments have led commodity currencies to trade within a neutral range against each other. The price compression observed may indicate the potential for powerful new trends.

Technical Analysis:

On the hourly chart, the AUD/CAD pair has lost its short-term bullish momentum and is now trading below the 50-period moving average in a range-bound market. Buyers are attempting to push the price towards the upper resistance of the range at 0.91960. If buyers regain control and break this resistance, subsequent targets are 0.92005, 0.92072, and 0.92124.

Alternative Scenario:

If buyers fail to break the 0.91960 resistance, the price may fall towards the support levels at 0.91897 and 0.91796. A break below this lower support would signal the beginning of a new bearish trend.

Key Levels:

Resistance Levels:

• Resistance 4: 0.92124
• Resistance 3: 0.92072
• Resistance 2: 0.92005
• Resistance 1: 0.91960

Current Price (at the time of analysis): 0.91908

Support Levels:

• Support 1: 0.91897
• Support 2: 0.91796

Impactful Events:

On Tuesday, investors’ attention will be focused on Capitol Hill as Federal Reserve Chairman Jerome Powell begins his semi-annual testimony before Congress, starting in the Senate. Recent economic data suggests easing inflation and a cooling labor market, increasing expectations for a Fed rate cut in September. However, Powell emphasized last week at the ECB’s annual forum in Portugal that the Fed still needs more data to ensure inflation has moderated sufficiently. The latest Consumer Price Index (CPI) report released last Thursday will also be closely scrutinized.

Oscillators and Risk Warnings:

RSI (Relative Strength Index): Bullish, indicating potential buying momentum.

MACD (Moving Average Convergence Divergence): Neutral, suggesting no strong momentum.

Moving Averages: Neutral, reflecting the current sideways price action.

Conclusion:

The AUD/CAD pair is positioned at a critical juncture as it trades within a range-bound market. A successful break above the 0.91960 resistance could lead to further gains, targeting 0.92005, 0.92072, and 0.92124. Conversely, failure to breach this resistance may result in a decline towards 0.91897 and 0.91796, potentially signaling a new bearish trend if these support levels are broken. Investors should closely monitor Powell’s testimony and subsequent economic data releases, as these will provide crucial insights into the Federal Reserve’s policy direction and broader market dynamics.