Over the last few years, the currencies of Australia and Canada have engaged in a friendly rivalry around the parity (1.00) level. From mid-2011 to mid-2013, the Australian Dollar held the upper hand, with the AUD/CAD pair finding support at the 1.00 four separate times. In mid-2013, the pair broke below the parity barrier and the loonie was the stronger commodity dollar for the next 20 months.
Early this year, the polarity switched back in the Aussie’s favor once again, but with rates pulling back this month, another test of the critical 1.00 level may in the cards next week.
Zooming in to the daily chart only elevates the importance of parity to the AUD/CAD. Beyond the longer-term implications, 1.00 also represents the completion of a clear bullish Gartley pattern, marked by the convergence of the 38.2% Fibonacci retracement of XA, 161.8% Fib extension of BC, and AB=CD pattern. The pair’s 100-day MA also comes in just above 1.00 at 1.0016 as of writing, and the RSI indicator is approaching oversold territory. With so many key technical levels converging around 1.00, a bounce is favored if rates test that level later this week or early next week.
If we do see rates dip down to 1.00, the bullish Gartley pattern suggests that we could see a bounce toward 1.0200, the 61.8% retracement of the whole ABCD pattern. On the other hand, a conclusive break below 1.000 would create a failed pattern and open the door for a continuation down toward 0.9880 (50% of XA) or .9770 (61.8% of XA) next.