By: Mike Kulej
The Australian Dollar has been in the news a lot lately. It is still very strong against most currencies, even though it pulled back from the highs. However, its relationship with another one of the commodity currencies, the Canadian Dollar, is a little different.
This pair made a high of 1.0204 much earlier than other AUD pairs, in early November last year. Since then it has been moving sideways within a 400 pips wide congestion zone. During this time, successive peaks have become lower, as did the minor bottoms. This suggests a possibility of a major top under development in the AUD-CAD.
What's Happening Now
Currently the price once again is coming close to the previous low at 0.9695 and is likely to test it soon. This is becoming a very important support level and the next one is at 0.9200, very distant. Breaking of the present support could mark a start of a big sell off.
Other technicals are in line with price-action analysis. On the daily chart, the AUD-CAD is under the 100 SMA and the Ichimoku cloud, which now form a resistance to any upside movement. The MACD is bearish, while the ADX is rising, suggesting that a trend is getting stronger. Now all depends on what happens at the 0.9700 area, so it is worth watching.