USD/CAD Price Forecast: Down leg unfolding within long-term range

USD/CAD is declining within a large range.
The Loonie will probably fall to the range lows or an interim target.
The RSI is oversold indicating a risk of a reaction, although no signal has been given yet.

Joaquin Monfort FXStreet

USD/CAD is currently declining within a long-term range which has a ceiling in the 1.39s and a floor in the 1.31-1.32s.

The pair is unfolding a down leg within this range as the US Dollar (USD) weakens. Both the medium and short-term trends are now bearish, which given “the trend is your friend” favors short positions over longs.

USD/CAD Daily Chart

The pair is likely to continue falling in line with the trend, with an eventual target, most probably, at the range floor, starting at 1.3220.

An interim target is also situated at 1.3380 composed of swing lows in October 2023 and January 2024.

The Relative Strength Index (RSI) momentum indicator is in the oversold region indicating a risk of a pull back. However, a buy signal is not said to be given until RSI exits oversold and re-enters the neutral territory (on a closing basis) – which has not yet happened.

Given the oversold state of the RSI, however, traders are advised not to add to their existing short positions. Nor should they close them either, since RSI can remain oversold for a long time during downtrends whilst price continues making lower lows.

There is no sign from price that it is about to pull back as the chart keeps printing one red bar after another.

Author

Joaquin Monfort

FXStreet

Joaquin Monfort is a financial writer and analyst with over 10 years experience writing about financial markets and alt data. He holds a degree in Anthropology from London University and a Diploma in Technical analysis.

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