NZD/CAD opened the new week with a negative gap, but quickly hit support at 0.8625, and then it rebounded. However, the rate continues to trade below the prior uptrend line taken from the low of October 29th, and thus, even if it recovers somewhat more, we will consider the near-term outlook to be somewhat negative for now.
A break back above 0.8670 would confirm the case for some further recovery, perhaps until the 0.8715 zone, or even the aforementioned uptrend line. The bears may get encouraged to step back into the action from near those zones and may decide to push for another test at 0.8625. That said, in order to get confident on larger declines, we would like to see a decisive dip below 0.8615, marked by the low of December 18th. Such a break may pave the way towards the low of December 5th, at around 0.8585, the break of which may extend the slide towards the 0.8555 area, which provided decent resistance between November 26th and 29th.
Taking a look at our short-term oscillators, we see that the RSI rebounded from near its 30 line and now points up, while the MACD, although below both its zero and trigger lines, shows signs of bottoming as well. These indicators detect slowing downside speed and corroborate our view that some further recovery may be in the works before the next negative leg.
On the upside, we would like to see a strong break back above 0.8750 before we start assessing whether the prior uptrend has resumed. Such a move could initially aim for the 0.8800 zone, defined as a resistance by the peaks of December 30th and 31st. Another break, above 0.8800, would confirm a forthcoming higher high on the daily chart and is possible to see scope for extensions towards the 0.8870 area, marked by the high of July 23rd.
