USDCAD is in a bullish phase in the short term after rebounding from its lowest level since May 2015. The pair broke above the 50-day moving average this week, giving a bullish signal. RSI has crossed above 50 into bullish territory. The market structure on the daily chart is still bearish, with lower highs and lower lows since the May 5 high of 1.3793. The crossover of the 50-day MA below the 200-day MA highlights the bearish picture.
The pair has reached the upper 1.25-area after rising from 1.2061 and is now finding support at the 50-day MA at 1.2463. This support level is considered to be strong since it is the 23.6% Fibonacci retracement level of the May to September downleg. Momentum signals are bullish, giving scope for further upside in the market to target the 1.27 handle, with important resistance levels at 1.2718 (38.2% Fibonacci) and 1.2777 (August 15 high). USDCAD would need to reclaim the key 1.3000 area to indicate that the broader bearish trend has ended.
Falling below the 50-day MA would increase downside pressure and turn focus back to the 1.2061 low. From this point, additional losses are expected towards the next low at 1.1919. An extension below this point would strengthen the underlying bearish bias.
The short-term bullish bias has room to run as long as USDCAD can remain above the 50-day MA and momentum signals continue to rise. Near-term risk is tilted to the upside but it cannot be said there is a reversal in the underlying downtrend.