AUD/CAD has been consolidating through much of March and April but is turning to some bullish bias in May so far. Before we get too excited about the prospect of a bullish trend, let’s examine the possible resistance points.
Looking at the 4H chart we are indeed seeing a choppy but upward swings. However, we price crossed 0.97 there appears to be some strong selling. The candlestick combination around 0.97 can be interpreted as a reversal signal. For the near-term, there is downside risk towards the 0.9560-0.9590 area, where the cluster of 200-, 100-, and 50-period SMAs reside at the moment. A break below 0.9550 with the 4H RSI breaking below 40 would put pressure back to the 0.94-0.9411 lows.
Now let’s put our focus on the upside:
The downside is currently protected by he 0.94-0.9411 area, which is support going back to Dec. 2014, and even Dec. 2013-Jan.2014 (we will see this in the weekly chart).
To the upside the area just above 0.97 contains key resistance factors: 1) The 2015 falling trendline and 2) the 200-day SMA. So, don’t be surprised if price falls at least back to the 0.9550-0.96 area. Now if price holds above 0.96 for the most part, that means there is still juice to break above the trendline and 200-day SMA. This scenario would open up
0.9880 area. Above that the parity level would be insight. In the short to medium-term, this would be a bullish outlook, but it would still be in the context of the long-term bearish-neutral mode.
The weekly chart shows that in the long-term, at least since early 2013, AUD/cAD has been in either a symmetric or descending triangle.
So, while we should anticipate AUD/CAD making short-term bullish attempts, we need to limit the bullish outlook to the 0.9960-1.00 area.
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