Technical Analysis – USDCAD retains bearish technical picture; more downside seen after brief corrective move

USDCAD maintains a bearish trend but its downward trajectory has slowed after touching a more than 2-year low of 1.2061 on September 8. The market became overextended as indicated by the RSI oscillator which reached oversold conditions below 30 last week. This suggested that prices were due for a pullback or a consolidation phase in the near term.

The underlying downtrend remains intact as trend indicators are bearish. The 50-day and 200-day moving averages are negatively aligned after a bearish crossover on July 13. MACD – a momentum indicator – is bearish as it is below zero and falling. The odds for another leg lower are high.

Immediate support is expected at 1.2061 (September 8 low). This level was last seen in May 2015 and a break below this would trigger another move down to the next low at 1.1919.

The spike to 1.2238 yesterday was very brief and prices are heading lower again today, possibly indicating that the corrective move has ended. To confirm a lower top is in place USDCAD has to move below 1.2061 to see a resumption of the longer-term downtrend.

Only a move above 1.3000 would shift focus to the upside. For now, there are no signs of a reversal in the bearish trend. The risk is strongly to the downside based on trend and momentum signals. The small correction off 1.2061 suggests USDCAD is likely pausing ahead of another push lower.