AUD/CAD traded lower on Friday, after it hit resistance at around 0.9205, near the downside resistance line taken from the high of July 19. The fact that the rate keeps trading below that line paints a negative short-term picture, but we prefer to wait for a forthcoming lower low before we get confident on a trend continuation.
A dip below 0.9120, which is Thursday’s low, would confirm such a low and may encourage the bears to shoot for the 0.9065 area, which is defined as a support by the low of May 27, 2020. If they are not willing to stop there and decide to break that zone, then we may experience extensions towards the 0.9010 territory, near the low of May 4, 2020.
Shifting attention to our short-term oscillators, we see that the RSI lies below 50, but has just ticked up, while the MACD continues to run below both its zero and trigger lines. Both indicators detect negative speed, but the fact that the RSI has ticked up make us careful over a possible bounce before the next negative leg, perhaps for another test near the aforementioned downside line.
Having said all that though, in order to abandon the bearish case and start examining a bullish reversal, we would like to see a break above that line, and a move above the 0.9205 hurdle. This will confirm a forthcoming higher high on the 4-horu chart and could initially target the 0.9230 area, which provided strong resistance between Aug. 11 and 16. If the buyers do not stop there, then we could see advances towards the 0.9275 territory, the break of which may allow extensions towards the high of Aug. 4, at 0.9310.