USD/CAD has been in a sliding mode since Friday, when it hit resistance at 1.2572. Overall, it remains below the downside resistance line drawn from the high of December 20th, as well as below the prior upside support line taken from the low of October 21st. In our view, this keeps the short-term outlook bearish.
That said, in order to get confident on a trend continuation, we would like to see a clear dip below the low of January 13th, at 1.2453. This will confirm a forthcoming lower low and may allow declines towards the 1.2387 barrier, marked by the low of November 10th. If the bears are not willing to stop there, then we may see them diving towards the 1.2327 zone, defined as a support by the low of October 29th.
Shifting attention to our short-term oscillators, we see that the RSI lies below 50, but has just ticked up again, while the MACD, although negative, lies slightly above its trigger line. Both indicators detect downside momentum, but the fact that the RSI ticked up and the MACD is still above its trigger line, adds more credence to our view of waiting for a dip below 1.2453 before getting confident on larger declines.
We will start examining the bullish case if we see a strong recovery above 1.2730. This will confirm the rate’s return back above both the aforementioned diagonal lines and may encourage advances towards the peak of January 6th, at 1.2813, or the high of December 29th, at 1.2835. If neither territory is able to stop the advance, then we could see the bulls aiming for the 1.2918 barrier, marked by an intraday swing high formed on December 22nd.
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