USDCAD remains bearish in the medium-term and neutral in the short-term after the pause in the downtrend that started from the May 5 high of 1.3793 to the July 27 low of 1.2413. Technical indicators are confirming the bearish picture.
The pair has been trading between 1.2413 and 1.2777 since the end of July as these two levels have provided support and resistance. A break below 1.2413 would deliver additional pressure and risk pushing USDCAD towards the next major trough at 1.1919 (May 2015 low).
For now the odds of a further decline from current levels have diminished since the daily momentum signals have softened back to neutral (both MACD and RSI are moving sideways). Strong rejection of the low 1.24-area in late July and a bounce ahead of this level this week suggests that the market is now in a consolidation phase in the near term with scope to rise back towards the 1.2777 high. This is an important resistance level which is near the 23.6% Fibonacci retracement of the downleg from 1.3793 to 1.2413. USDCAD could see a move towards the next Fibonacci level (38.2%) at 1.2938 on a break of 1.2777 and indicate downside pressure has eased. But only a move above 1.3100 (50% Fibonacci) would change the bearish picture to a more bullish one.
The bearish crossover of the 50-day with the 200-day moving average on July 13 keeps the risk to the downside for the medium-term outlook but USDCAD is neutral in the short-term.
