Can Multiple Confluences Drop AUDCAD Further?
AUDCAD Has Been in a Bearish Trend since the Beginning of the Year after Touching the Long-term Trendline and 200 MA.
Falling 250 pips since the start of the year, AUDCAD is clearly in a strong downtrend. The pair continues to show weakness after rejecting the daily trendline for the umpteenth time. All long-term timeframes are aligned indicating a bearish trend for this cross-rate pair. From the fundamental side, it also supports the weakening of this pair. Australia, which was hit by the Omicron outbreak, is increasingly overwhelmed as infections are rising by the hundreds of thousands per day. Meanwhile Canada, the world's fourth largest oil producer, continues to develop environmentally friendly technologies that can attract investors' attention and eventually bring about an appreciation in the value of the CAD.
Quick Recap on AUD/CAD
AUDCAD is observed to be bearish for all timeframes. Will this pair retest? And where will this pair fall?
Let's dive in a little deeper to see how AUD/CAD fare on multiple timeframes:
AUD/CAD Monthly Technical Analysis
On a monthly basis, AUDCAD looks bearish after last May 2021 closed below the support area at 0.93375 and formed a lower low. Last month's candle did close bullish, but it has crossed the lowest limit in the previous month and failed to penetrate the highest level from the previous month. Now, on the January candle, AUDCAD is poised to touch its lowest level last December after forming a top-wick.
AUD/CAD Weekly Technical Analysis
The 50, 100 and 200 MA lines continue to hover above the AUDCAD price movement. This symbolizes that even on a weekly basis, this pair is still very bearish. We can even draw a down trendline that was created since May 2021. The price continued to form a lower high and lower low structure on the weekly timeframe and closed strongly bearish for the last two weeks.
AUD/CAD Daily Technical Analysis
Based on the daily timeframe, AUDCAD will continue to be bearish as long as it doesn't break above 0.92200 and forms a higher low. However, it seems that the level is still far away and AUDCAD will be bearish for longer, although in the last two days it was closed bullish which indicates the pair is ready for a retest. The question is, where will AUDCAD retest and form a new lower high? Let's top down again to H4.
Trading idea for AUD/CAD
On the H4 timeframe, we can describe the descending trendline that was created since the end of last December and managed to form a lower high on January 5. Now on H4 it is observed that there is a key level area that also confluences with the MA200 and the downtrendline, to be precise around 0.91550 which might become a new lower high area before AUDCAD drops further.
Order: Sell Limit
Stop Loss: 0.92000
Target 1: 0.91000 (50% + BE)
Target 2: 0.90500 (25%)
Target 3: 0.89800 (25%)
Total Risk: 1-2% Equity (Medium Risk Setup)
Reason: Bearish structure, break and retest with key level + down trendline + MA 200
ZFX Analyst’s Predictions
Australia, which is busy dealing with Omicron, will likely find it difficult to repair its economic recovery in the near future. Where the priority of the local government is to prioritize public health and especially workers in essential sectors. The imposed lockdown also disrupted supply chains and the macro economy.
Meanwhile, oil prices which have continued to increase since the beginning of the year have brought its own blessings to Canada, which is one of the largest oil producers in the world. However, Canada is also beset by inflation problems. Canadian inflation is at an 18-year high of 4.7%, while the Bank of Canada's key interest rate has hit a record low of 0.25% since March 2020. The central bank has signaled it will raise rates after April, but money markets are not ruling out the possibility. there will be an increase this month. If Canada will immediately increase interest rates, it will certainly bring an appreciation in the value of the CAD in the near future.
Risk Warning: The above content is for reference only, and does not represent ZFX’s position. ZFX does not assume any form of loss caused by any trading operations carried out in accordance with this article. Please be firm in your thinking and do the corresponding risk control.
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