The Australian dollar versus the Canadian dollar currency pair extended its decline and reached the 0.8900 psychological level. This looks great form the sellers perspective, but there are some signs that a correction may be in place.
Long-term perspective
From 0.9483 the price entered a descending trend that extended — at the time of writing — until the 0.8900 level. On its course, it pierced the 0.9104 level which is a very important support from the weekly and daily standpoint.
This event puts the pair in bearish territory, but even so the profits that they made have to be parked and this will lead to an appreciation. But this is not the only reason for which a correction is to be expected. The next reason is that the 0.8900 level serves as the next support for the weekly timeframe and thus adds to the reasons for which the bears are marking their profits: the aggressive bullish traders are watching the area and, as a consequence, they could try to drive prices higher. Even if that, on its own, has little impact on the overall bearish profile of the currency pair, this could erase part of the gains that the sellers worked so hard for, so they have to protect them.
Another reason is that a healthy trend — in other words a trend that wants to continue, and not look like an exhaustive bearish move that later hands the control to the bullish side — must crystallize some correction phases.
All this serve as reasons for an appreciation to emerge, an appreciation that has big chances of being limited by the double resistance etched by the upper trend line of the descending channel and the 0.9104 resistance level. The first target for this new leg down is 0.8800. If the price manages to breach the double resistance and confirm it as a support, then 0.9387 will be a first target.
Short-term perspective
The steep decline pierced 0.9000 but was repelled by 0.8900. However, as long as 0.9000 holds as resistance new downward movements are possible with a first target at 0.8900.
On the other hand, if the price manages to pierce 0.9000 and close above the 38.2 Fibonacci retracement level, then 0.9118 would be a good target.
To note is the fact that 0.9118 aligns with the 61.8 retracement, being a bearish last standing, but it also aligns with the daily perspective that hints the conclusion of the correction at the aforementioned double resistance area.
Levels to keep an eye on:
D1: 0.8900 0.9104 0.8800 0.9387
H4: 0.8900 0.9000 0.9118 and the Fibonacci 38.2 and 61.8 (mainly) retracement levels
If you have any questions, comments, or opinions regarding the Technical Analysis, feel free to post them using the commentary form below.
