Technical Sentiment: Bearish
Key Takeaways
The Australian Dollar edged lower against a basket of currencies in early Asian trading, after closing below a one year bullish channel at the end of last week.
Technical Analysis
In recent months, AUD/CAD switched from a long term bullish trend to a confirmed bearish trend, with massive sell-offs breaking through all major support levels. Just last week, when volatility increased across the board, the pair made a decisive push lower which invalided a one year old bullish channel in favor of further sell-offs in the immediate future.
As the 9/22 US trading session is underway, AUD/CAD is trading around 0.9760, probing one of the strongest support clusters in this area. Price is well below all the large moving averages (50, 100 and 200 SMA), consequently we have to rely on old support and Fibonacci levels to gauge areas of interest. 0.9730/40 was a strong price pivot zone in the 2nd half of 2013. Additionally, this area is strengthened by a Fibonacci confluence between 0.9758 (50% from 0.9168 up to 1.0348) and 0.9768 (61.8% from 0.9409 up to 1.0348). With Stochastic showing extreme oversold conditions on 4H and Daily timeframes, it will be interesting to see if offers in this area can help the pair spring back to 0.9830 – 0.900 for a re-test of previous support levels, before the downtrend resumes.
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A Daily close below 0.9750 will favor a bearish AUD/CAD continuation toward 0.9600, without any bullish corrections whatsoever. 0.9600/20 is a strong cluster formed between a pivot level and 61.8% Fibonacci between 0.9168 and 1.0348, and the sell-off is expected to temporarily exhaust once it is reached.
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
