USDCAD is neutral in the short term after a recent rally lost steam at a high of 1.2916. The underlying downtrend from 1.3793 is weaker after the strong rebound but the pair still remains under the 200-day moving average, keeping the bearish market structure still in place.
The short-term technicals are neutral and suggest the rally is exhausted. RSI reached into overbought levels above 70.
USDCAD is expected to consolidate in the near-term unless it can break above the 50% Fibonacci retracement level of the downleg from 1.3793 to 1.2061. Rising above this 1.2924 level would bring the 200-day MA into sight. This is an important barrier as it converges upon the 1.3000 psychological level. Clearing this key resistance would put USDCAD on the path to re-test the 1.3793 peak and change the outlook to bullish.
To the downside, soft support is expected at last week’s low of 1.2780. Below this, the 1.2500 level is another support (close to the 23.6% Fibonacci). A break below this support zone would turn the focus to the 1.2061 more than two-year low to strengthen the bearish bias, with a high probability of resuming the broader downtrend.
In the short run, USDCAD is expected to remain capped under 1.2916, with immediate risk tilted to the downside
