June 30, 2021 14:52:01
We wrote about NZD/CAD yesterday and how bearish momentum could see a break through recent lows. AUD/CAD is in a similar position as it too is now approaching a key support zone.
Of course, oil acts as a key driver of the loonie so we need to respect the OPEC+ meeting and potential output decision tomorrow. That said, Brent jumped back above $75 this morning on reports that the cartel is expected to discuss an extension of the oil supply deal beyond April 2022 following chatter that oil ministers are concerned about an oversupplied market next year. The base case for the meeting is an increase to output by 500k, so anything less than this will see bulls push prices higher and potentially CAD rises too. (We note that a new infection wave could slow market rebalancing.)
Weekly Chart: Support zone in view
We can clearly see the downtrend channel that AUD/CAD has been in this year after topping out at 0.9993 during the last week of February. Having broken down through the 200-week SMA, that indicator now acts as strong resistance above around 0.94. The pair currently sits on the 100-week SMA in a prominent area of support which also encompasses the October 2020 low and the spike low from December 2018.
Momentum indicators are still tilting bearishly for AUD which implies increasing pressure for more downside. The target for sellers if we do break this confluence of levels may come quickly with eyes on a fall towards 0.90 with the 50% retracement of the 2020/2021 rally being at 0.9029.
Daily Chart: Hovering above the zone
Moving into the daily timeframe, AUD/CAD has traded sideways since mid-May but pressure is building in trend strength signals for a push lower. We’ve highlighted the support zone which also includes the 38.2% retracement level of the 2020/2021 rally.
Remember that if you have a short position in NZD/CAD that we wrote about yesterday and you execute a trade going short AUD/CAD, then you will be “double long” in CAD – worth bearing in mind with the OPEC+ meeting around the corner.
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