USDCAD maintains a bearish picture in the medium term with a steady downtrend from the May 5 high of 1.3793. The short-term bullish phase from 1.2061 stalled at 1.2518 yesterday after prices found resistance at the 50-day moving average and consequently closed below it.
The RSI has been moving sideways during today’s trading which might be an indication that upside momentum has weakened, though it is too early to conclude in that direction – further evidence is needed. Immediate support is expected at the key 1.2400 level which has acted as strong resistance recently. Despite pushing above this level earlier this week, USDCAD was unable to sustain gains and could be forming a lower top at 1.2518. The market has been making lower highs and lower lows since declining from 1.3793.
Should the market move below key support at 1.2400, downside pressure could increase with USDCAD seeing a re-test of the 1.2061 low. Pushing below this trough would strengthen the medium-term downtrend and target the next low at 1.1919. From here, more weakness in the market would set USDCAD on a path towards the 1.1500 area.
The market would have to rise above 1.3000 to indicate the bearish phase has ended. Trend indicators are painting a bearish picture, after the 50-day MA crossed below the 200-day MA in July. This negative alignment highlights the bearish medium-term bias for USDCAD but in the short-term, downside scope may be limited at the moment as momentum oscillators lack clear direction. Near-term consolidation is possible with risk tilted to the downside.