Technical Sentiment: Bearish
Key Takeaways
- Pair trades below 200 Simple Moving Average on 4H;
- Breaks below bullish trendline;
- The 1.0150 support is next, followed by parity.
After last week’s trendline bounce, AUD/CAD bounced just enough to test the price pivot zone at 1.0254 and reject towards the downside. Since then, the pair has broken below the bullish trendline starting from January 2nd and easily crossed below the 200 Simple Moving Average on the 4H time frame, slowly invalidating all the support levels which held the 4-month uptrend intact.
Technical Analysis
The rejection off the 1.0254 pivot zone led to the formation of an engulfing bar on the daily chart, a bearish price action pattern which was activated during the Asian session. The pair is now heading lower to test a very strong support level at 1.0150. The 50-Day Moving Average, priced at 1.0133, is a nearby secondary support.
1.0150 is a crucial level on the Daily timeframe. It is the last barrier before the pair shows a complete bearish trend configuration. A Lower Low is required from AUD/CAD, otherwise future rallies might not be capped half-way and selling them will no longer be a viable option.
Daily Stochastic is heading into oversold territory, putting the pair at risk of a bullish bounce soon. If traders fail to break below 1.0150, AUD/CAD might begin another rally towards 1.0212 (200 SMA on 4H) and 1.0254. If the resistance levels won’t hold, the pair might resume the overall uptrend in the weeks to come.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets
