Is the Australian dollar set for further declines against the Canadian dollar, or could we see buyers making a stand at critical turning points? Let’s dive into the key levels we’re keeping an eye on in the 4-hour chart.
AUD/CAD appears to be gaining downside momentum, having broken below a narrow consolidation range between 0.8960 and 0.9000. This move is in line with the robust downtrend that started back in October 2024. Consistently forming lower highs and lower lows, this pair is following a descending channel. The latest breakout hints that sellers might be preparing for another leg downward.
Bear in mind that price movements and volatility are often influenced by fundamental factors. If you haven’t yet reviewed the economic backdrop for the euro and the Canadian dollar, it’s a good time to check the economic calendar and keep yourself updated with the latest daily news.
On the technical front, the 100-day Simple Moving Average (SMA) is currently positioned below the 200-day SMA, reinforcing the bearish sentiment. These moving averages are aligning with the downward trend in “highs” and the resistance at the R1 pivot mark of $0.90523, creating a crucial zone of interest for both bulls and bears.
At the moment, the market is breaking below recent consolidation levels. A move lower, if sustained, could entice more technical sellers, potentially driving AUD/CAD to the next significant zone. This major barrier resides where the S2 pivot level ($0.88793) intersects with the 0.8900 psychological mark and intersects the series of descending “lows.” This could be where buyers might jump in, attempting to take profits or initiate a reversal. Given that these “lows” have historically provided support, it’s worth watching, especially since the distance matches the daily ATR of around 56 pips.
However, if bulls successfully defend the current levels and push the pair back above the consolidation range of 0.8960 to 0.9000, we could see a move towards the strong convergence of the moving averages, the descending “highs,” and the R1 pivot resistance. However, keep in mind that moving against the prevailing trend carries more risk. Thus, it’s wise to have a good grasp of the underlying fundamentals before taking a counter-trend position.
This zone indeed holds the most compelling technical setup. Should bearish reversal patterns emerge here, it might attract both short- and long-term sellers, assuming the fundamental outlook remains unchanged.
There are plenty of potential scenarios to consider. Whichever direction you opt to trade, make sure to practice sound risk management. Stay informed on economic developments affecting the Australian and Canadian dollars that might influence your trades!
