Bearish Correction Looks Likely Following Recent Bullish Rally

Forex

Economic

Summary:

Given the technical signals currently developing on the chart, a downward move toward the lower support targets appears to be the path of least resistance for the pair.

SELL AUDCAD

EXP

TRADING

0.99063

Entry Price

0.98030

0.99800

0.99036 -0.00009 -0.01%

0.0

Pips

Flat

0.98030

Exit Price

0.99063

Entry Price

0.99800

The Australian economy showed clear signs of slowing down during the first quarter of the year. According to data published on Wednesday by the Australian Bureau of Statistics, Gross Domestic Product (GDP) grew at an annual rate of 2.5%, coming in below the 2.6% recorded in the same period a year earlier and missing the market expectation of a 2.7% expansion. On a quarter-over-quarter basis, economic activity increased by just 0.3%, falling short of the projected 0.5% forecast and moderating significantly from the 0.8% growth rate observed in the previous quarter.

Business activity indicators also highlighted this loss of momentum across the private sector. The S&P Global Services PMI fell to 48.7 in May, down from its previous level of 50.7, though it managed to beat the initial market estimate of 47.7. Similarly, the Composite PMI was revised upward to 48.7 from a lower preliminary reading, landing above the general consensus of 47.8. Despite these positive updates, both metrics remain below the neutral 50-point threshold, pointing to a continued contraction in private sector business conditions. This economic backdrop is further reinforced by the recent cooling of consumer inflation and a steady increase in the national unemployment rate, which reached its highest level in nearly four and a half years during April. As a direct result, market participants have sharply reduced their expectations for the Reserve Bank of Australia (RBA) to implement another interest rate hike at its upcoming policy meeting in June.

In Canada, by contrast, financial markets continue to price in a significantly more restrictive path for near-term monetary policy. The domestic swaps curve still reflects expectations of more than 50 basis points of additional policy tightening by the Bank of Canada (BoC) over the next twelve months, a scenario that would push the benchmark interest rate toward the 2.75% area. However, this aggressive market pricing looks increasingly difficult to justify when looking at the underlying macroeconomic data. Both underlying core inflation metrics and long-term inflation expectations remain relatively well-contained, while the Bank of Canada’s own internal projections point to a negative output gap for the first quarter of 2026, estimated between -1.5% and -0.5%. At the same time, several leading economic indicators continue to show visible weakness across the Canadian labor landscape.

Before the release of the April employment figures, the market consensus anticipated a modest addition of 15,000 jobs following the 14,100 positions gained in March, while the unemployment rate was expected to hold steady at 6.7%. Instead, the official numbers surprised market participants on the downside and revealed a much sharper deterioration than expected. The Canadian economy unexpectedly cut 18,000 net jobs during April, extending a contractive hiring trend that has been visible throughout several months of 2026. This brings the cumulative number of lost jobs since the start of the year to approximately 112,000. In parallel, the national unemployment rate rose to 6.9%, matching the cyclical highs recorded in April of last year and reinforcing clear signs of a broader cooling across the Canadian economy. Bearish Correction Looks Likely Following Recent Bullish Rally_1

Bearish Correction Looks Likely Following Recent Bullish Rally_1

Technical Analysis

From a chart perspective, AUD/CAD has met steady resistance at the 0.9931 level as it drew close to the previous local peak of 0.9957 struck on May 13. While buyers originally aimed to push the price toward psychological parity, it is becoming clear that this objective may remain out of reach for now. The price has failed to establish a fresh higher high at this key junction and is starting to turn downward, which opens the door for a bearish correction that could target the next local support floor waiting at 0.9803. Meanwhile, the 100 and 200-period Moving Averages are currently tracking at 0.9875 and 0.9840, respectively. These lines have regularly provided dynamic support throughout the main uptrend, but they have recently moved much closer to the current price, meaning that a clean close below these levels would likely accelerate the downward move.

A review of the momentum oscillators provides further confirmation for this budding downside setup. The Relative Strength Index (RSI) is currently hovering at the 48 level, sitting just under the neutral zone and leaving plenty of open chart space to accommodate a deeper corrective move lower. At the same time, the MACD is already printing a negative histogram that is starting to gain downward depth, while its signal lines are positioned just a fraction above the neutral zero line. A clean downward crossover of these signal lines into the negative zone would add more weight to the sell-side move. Given the technical signals currently developing on the chart, a downward move toward the lower support targets appears to be the path of least resistance for the pair.

Trading Recommendations

Trading direction: Sell

Entry price: 0.9905

Target price: 0.9803

Stop loss: 0.9980

Validity: Jun 16, 2026 15:00:00

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Bearish Correction Looks Likely Following Recent Bullish Rally

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