USDCAD came to the defence of the bulls on Thursday after clinging to a footing near the 23.6% Fibonacci retracement of the 1.2006 – 1.2962 upleg at 1.2736.
The price has almost reversed its weekly losses to turn neutral, refusing to abandon its five-week rally, but the 1.2850 area, which includes the downward-sloping resistance trendline from 1.2962, seems to be problematic for the pair.
Nevertheless, the momentum indicators are currently keeping the risk tilted to the upside as the RSI remains elevated comfortably within the bullish area and the MACD hovers clearly above its red signal line. Despite its recent downfall, the blue %K Stochastic line is looking for a positive crossover with the red %D line, reflecting a persisting buying presence as well.
Yet, traders may not engage in new buying activities unless the pair closes successfully above the restrictive trendline, and more importantly, above the nearby key resistance of 1.2877. If efforts prove successful, all eyes will turn to the crucial 1.2950 ceiling, where the price has stopped three times since the end of 2020. A decisive step above this tough bar could initially pause around the 38.2% Fibonacci level of the March 2020 – May 2021 downtrend at 1.3023. If not, the pair could directly ascend towards the 1.3150 barrier.
In the event of a strong rejection at 1.2850, the price could sharply shift lower to seek shelter somewhere between the 1.2736 mark and the 20-day simple moving average (SMA). Failure to rebound here could open the door for the 200-day SMA at 1.2630, while a step beneath the 1.2600 round-level could sharply squeeze the price to 1.2500 – 1.2470.
All in all, USDCAD is trading cautiously bullish in the short-term picture. A victorious escape from the crucial 1.2950 constraining zone would push the market out of the long-term range and back on an upward path.
