Bearish Correction Fades Rapidly As New Bullish Impulse Takes Shape

Forex Central Bank

Summary:

This failure to sustain lower prices indicates that buyers are stepping in aggressively at these value levels.

Buy AUDCAD

EXP

Trading

0.95203

ENTRY

0.96400

TGT

0.94400

0.95821 +0.00813 +0.86%

Point

Flat

0.94400

CLOSING

0.95203

ENTRY

0.96400

TGT

In Canada, the S&P Global Manufacturing PMI revealed a notable improvement, rebounding to 50.4 in January from the previous reading of 48.6. This shift signals a tentative return to expansionary territory for the Canadian industrial sector, albeit at a modest pace.

Commenting on the data, Paul Smith, Economics Director at S&P Global Market Intelligence, noted that after a challenging 2025, the latest PMI indicators suggest the Canadian manufacturing industry has entered the new year with a more constructive tone. According to Smith, production levels have finally stabilized following nearly twelve consecutive months of contraction. Furthermore, business confidence regarding future output has strengthened, and employment saw marginal growth for the first time in a year. Despite these domestic improvements, the Canadian Dollar (CAD) remains under significant pressure due to the sharp decline in global energy prices. As a premier crude exporter, Canada is highly sensitive to the West Texas Intermediate (WTI), which is currently trading near $61.78 per barrel—a steep daily decline exceeding 5.5%.

Meanwhile, in Australia, market participants have almost entirely priced in a 25-basis point hike from the Reserve Bank of Australia (RBA), which would elevate the official cash rate to 3.85%. This hawkish expectations shift is underpinned by a resilient domestic growth profile and clear evidence that inflationary pressures are regaining momentum. However, the central bank is expected to exercise prudence, likely refraining from providing explicit forward guidance.

The official policy decision is scheduled for Tuesday at 03:30 GMT, alongside the release of the Monetary Policy Statement (MPS) and updated quarterly economic projections. Shortly after, at 04:30 GMT, RBA Governor Michele Bullock will address the press. A perennially tight labor market, characterized by unemployment hovering near 4%, remains a cornerstone of the bank's restrictive stance. Data from the Australian Bureau of Statistics (ABS) further supports this, with the monthly Consumer Price Index (CPI) rebounding to 3.8% year-over-year in December, surpassing market consensus.

On the macroeconomic front, broader indicators continue to suggest persistent price pressures, exemplified by the TD-MI Inflation Lead Indicator rising to 3.6% in January. Attention also remains fixed on China, Australia's primary trading partner, where the RatingDog Manufacturing PMI landed at 50.3, signaling a slight but welcome improvement in regional industrial activity. Bearish Correction Fades Rapidly As New Bullish Impulse Takes Shape_1

Bearish Correction Fades Rapidly As New Bullish Impulse Takes Shape_1

Technical Analysis

The AUD/CAD pair remains entrenched in a definitive primary uptrend. Following a recent corrective phase, the price action gravitated toward the 100-period Moving Average on the 4-hour chart, currently situated at 0.9474.

The pair’s rapid bullish reaction from this level, combined with its inability to close decisively below the local support at 0.9452, suggests that bearish momentum is dissipating quickly. This failure to sustain lower prices indicates that buyers are stepping in aggressively at these value levels.

Our momentum analysis further corroborates this bullish outlook. The Relative Strength Index (RSI) descended rapidly to the 37 level, and while it has not reached oversold territory, it is exhibiting a clear hidden bullish divergence. This suggests that the underlying trend remains strong despite the temporary pullback. Additionally, the MACD is already printing positive histogram bars while remaining above the neutral zone, signaling that the bullish impulse is regaining control.

Based on this technical confluence, we anticipate a trend resumption with a primary upside target at the 0.618 Fibonacci expansion level, located at 0.9644. As long as the price maintains its integrity above the moving average cluster, the bias remains firmly in favor of the bulls.

Trading Recommendations

Trading direction: Buy

Entry price: 0.9520

Target price: 0.9640

Stop loss: 0.9440

Validity: Feb 13, 2026 15:00:00

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