NZD/CAD traded lower on Thursday, breaking below the key support obstacle of 0.8500, which stopped the rate from drifting lower on August 7th and 19th. The prevailing trend on the 4-hour chart appears to be a downtrend since July 22nd, while the dip below 0.8500 confirms a forthcoming lower low and perhaps the continuation of that trend. Thus, we will hold a bearish stance with regards to the short-term outlook of this pair.
If the bears are willing to stay behind the driver’s seat, we may see them challenging the 0.8455 barrier soon, a support marked by the low of October 15th, last year. The rate could stall around there for a while, or even rebound somewhat, but as long as it stays below 0.8500, we would see a decent chance for the bears to jump back into the action and perhaps overcome the 0.8455 zone. Something like that may pave the way towards the 0.8400 territory, which is slightly above the inside swing highs of October 8th and 9th.
Our short-term momentum studies detect strong downside speed and support the notion for some further near-term declines. The RSI edged south and appears ready to touch its 30 line very soon, while the MACD lies below both its zero and trigger lines, pointing down as well.
On the upside, we would like to see a strong recovery above 0.8565, which is Tuesday’s high, before we abandon the bearish case. Such a break would confirm a forthcoming higher high on the 4-hour chart and may allow the rebound to continue towards the peak of August 15th, at 0.8600, or the high of August 7th, near 0.8625. If the bulls are strong enough to overcome the 0.8625 level as well, then we may experience stronger upside extensions, perhaps towards the 0.8700 zone, which provided decent resistance on August 5th and 7th.
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