Key Points:
- Both the AUD and the CAD have been performing well recently
- The AUD/CAD seems to be on the cusp of taking a tumble
- Losses could extend to 0.9929 and beyond
Both the AUD and the CAD have been outperforming the greenback recently, surging to long-term highs in only a matter of weeks. Whilst a large portion of this momentum can be chalked up to the anaemic USD, much of the shift in bias has been on the AUD and CAD side of the quotes – a sign that the two currencies are substantially more bullish than it might at first appear. Therefore, it could be interesting to take a look at how the two currencies are faring relative to one another and what could be next for the AUD/CAD.
As shown on the below daily chart, its fast becoming apparent that not only is the CAD winning the tug-of-war in the long-term but it is likely to strike another blow against the AUD in the immediate future. Indeed, even the AUD’s potent rally over the past week or so seems to be having trouble breaking through a robust technical zone of resistance. What’s more, if this level holds, the rather bearish technical outlook could slam the pair hard – potentially sparking a major rout.
Taking a closer look this technical outlook, it becomes clear that pushing past resistance is going to prove rather difficult. Firstly, the AUD/CAD’s proximity to the upside of the falling wedge and the presence of the 61.8% Fibonacci level are providing a decent cap on upsides going forward. Moreover, this zone of resistance is reinforced by the placement of the 100 day EMA just above current price action. However, whilst these readings provide a fairly solid argument for a cap on upsides, they don’t necessarily mean a substantial downtrend is on the way.
Nevertheless, numerous other signals are being given that the bears are likely to be on the offensive in days to come. For one thing, the overall EMA bias is highly bearish and likely to be putting pressure on the pair moving ahead. In addition, the surge higher over the past week or so has pushed the AUD/CAD into overbought territory which could cause all but the most aggressive of bulls to ease up on the gas – leaving the pair exposed to a counter attack from the bears. Ultimately, we expect this to result in at least a slump back to 0.9929 in the near-term before the 38.2% Fibonacci level provides some support.
Overall, the outlook is looking rather grim for the AUD/CAD and a retreat is definitely looking likely within the next week or so. Of course, a fundamental upset could help the pair to remain afloat but it’s worth remembering that it has the room to meander sideways without seriously endangering the technical forecast.