USDCAD saw its sharpest one-day rally in nine months on Tuesday as it managed to climb back above the 1.27 handle for the first time in a week. The pair has been stuck in a descending channel since January and touched fresh 10-month lows just before the rally.
The positive momentum from yesterday’s upswing is still in place on Wednesday and looking at the stochastic oscillator chart, there is scope for further gains as the %K and %D lines are ascending and have not reached overbought territory yet. If prices continue to climb, resistance is likely to come from the top of the channel at around 1.2860.
However, without a break above the channel and a push towards the 50-day moving average, the bearish outlook in the medium term will hold. The negative outlook is underlined by the downward sloping moving averages. Support to the downside is likely to come from the key 1.26 and 1.25 levels, while a drop below Tuesday’s 10-month low of 1.2460 will only extend the current downtrend.
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