AUD/CAD Stable Below 200-Day Moving Average

Technical Sentiment: Bearish

Key Takeaways

• The Canadian Dollar maintains a bullish bias against most counterparts;
• Aussie had neutral reactions following Monetary Policy Meeting Minutes during Asian trading;
• Canadian Manufacturing Sales (bullish expectations) are due at the beginning of the US session on Tuesday;

As Australian Dollar long positions continue to unwind, AUD/CAD grinds toward lower support levels. Now that the pair has crossed below the 200-Day Simple Moving Average, investors have set their targets as low as 0.9830 in the short term.

Technical Analysis

AUD/CAD started off the trading week with a very bearish tone, opening with a medium size gap below parity and the 200-Day Simple Moving Average in one shot. Consequently, any scenarios from last week that were focused on a possible exhaustion, followed by a bullish correction, have been temporarily put on hold.

Nearest support level is located at 0.9936, marked by July’s 2014 Low, and it represents a crucial line standing in the way of the main downtrend. Because AUD/CAD formed three consecutive tops around 1.0225/32, coupled with Stochastic being located in oversold territory on 1H, 4H and daily timeframes; traders should pay special attention in case a bullish bounce happens at 0.9936. Such a reaction would signal temporary range conditions and could trigger choppy behavior in the coming days.

On the other hand, a break and Daily Close below 0.9936 will indicate a very strong desire to test 0.9800 – 0.9830 in the coming days, where we can identify a strong cluster formed between an old price pivot zone (January-February 2014) coupled with the support trendline from AUD/CAD’s 1-year old bullish channel.

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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets