USDCAD has bounced back towards its 50- and 200-day moving averages (MA) after dipping to a more than two-week low of 1.2458 on Thursday. The price is currently testing the 38.2% Fibonacci retracement June-December 2021 uptrend at 1.2597 and there is a strong prospect of further gains in the short term.
The RSI is in the process of climbing above the 50-neutral point, while the MACD histogram is continuing to advance higher above its red signal line and could soon cross into positive territory.
If the bullish bias holds and USDCAD manages to overcome the immediate resistance of the 38.2% Fibonacci just below the 1.26 level, there are further tough obstacles ahead. The 200-day MA is at 1.2621 and slightly higher at 1.2639 is the 50-day MA, which is heading towards it for a bearish cross.
A successful break above this resistance zone would strengthen the upside momentum but the bulls would then have to battle the 1.2675 mark to enter the Ichimoku cloud, while the 23.6% Fibonacci of 1.2737 could block the exit out of the cloud. Nevertheless, clearing the cloud would pave the way for the crucial 1.2900 level, which was the March peak.
To the downside, the April lows of 1.2458 and 1.2402 could halt the declines from reaching the October 2021 trough of 1.2287 should the positive bias fade and bearish forces take over. However, if those support barriers give way and the losses deepen all the way till the 78.6% of 1.2211, the neutral outlook in the medium term would also turn bearish.
To sum up, although the positive momentum is gathering steam in the very near term, the neutral pattern in the bigger picture remains intact. Unti the price approaches the upper region of this range, starting with the 1.29 level, it’s hard to see a bullish shift taking place.
