The Australian dollar versus the Canadian dollar currency pair retraced sharply from the area of the 0.8900 psychological level. Even if the price is nearing important resistance areas, the fact that such a strong bullish candle was printed on September 3, makes the bears question whether or not they should short the market.
The price is well contained into the descending channel and the current phase — starting from August 6 — looks like a consolidation limited by the 0.9023 level as resistance and 0.8900 as support. Given these two resistance lines (the upper line of the descending channel and the 0.9023 level) one might think that this double resistance area could very well serve as a good spot to plant short positions.
However, there are some facts that must be taken into consideration before such an approach can be put into action. The first is that the September 3 candle has printed a strong bullish engulfing candlestick pattern. The second aspect that must be taken into consideration is that the highs of this consolidation phase are relatively placed around the same area — the 0.9023 level. On the other hand, the lows — 0.8888 and 0.8905 — tend to look like a double bottom.
In the light of these considerations, what one can see on the chart is a descending trend with a potential double bottom hanging to its end; a chart pattern that could very well spell the end of the descanting trend.
After all, the double bottom could take the shape of a rectangle or triangle, but the standing argument is the bullish engulfing candle. As long as it is not invalidated, the upwards move can continue. So, as long as the price does not print a shooting star — or any other pattern with a long upwards tail — and is not revisiting the 0.8960 area yet again, the first target is represented by the 0.9100 psychological level, with its technical correspondent 0.9225.
The price got above the 0.9000 level after bouncing from the 11.4 Fibonacci retracement level and piercing the descending resistance line.
The price now tests the 38.2 level. It could either continue rallying from it, or retrace, confirm 0.9000 as support, and then aim for 50.00 and 61.8, respectively, the latter aside from being a bearish last standing is accompanied by the technical 0.9118.
If the price manages to reconquer 0.9118 (alongside with 61.8), the path to 0.9238 is open.
Levels to keep an eye on:
D1: 0.9023 0.9108 0.9225 0.8900
H4: 0.9000 0.9118 0.9238 and the Fibonacci retracement levels — mainly 11.4 38.2 61.8
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