AUD/CAD traded higher overnight, after it hit support at 0.9506. However, the bounce was stopped by the downtrend line drawn from the peak of March 3rd, and then the rate retreated. In our view, as long as the price structure remains of lower highs and lower lows below that downtrend line, we would consider the short-term outlook to be negative.
A clear break below 0.9596 may signal the continuation of the existing downtrend and may initially pave the way towards the low of March 24th, at 0.9525. If that barrier is not able to stop the bears, then its break would confirm a forthcoming lower low and could see scope for extensions towards the 0.9474 area, defined as a support by the low of December 8th.
Shifting attention to our short-term oscillators, we see that the RSI turned down and fell back below its 50 line, while the MACD, although fractionally above both its zero and trigger lines, shows signs of topping as well. Both indicators suggest that the rate may start picking up downside speed again soon, which supports the case for the continuation of the prevailing downtrend.
In order to abandon the bearish case and start examining a trend reversal, we would like to see a break above today’s high of 0.9643. This will also take the rate above the aforementioned downtrend line and may encourage the bulls to push the action towards the 0.9713 area, which provided resistance on March 18th and 22nd. Another break, above 0.9713 could carry more bullish implications, perhaps paving the way towards the peak of March 11th, at 0.9795.
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