USDCAD is looking weak after falling out of a 2-month range. Prices broke below key support at 1.2500 although appear to have stabilized for now just below this level. The daily RSI is in bearish territory but has turned neutral in the short term, very close to oversold levels.
Looking at the bigger picture, USDCAD was trading in a range between 1.2680 and 1.2900 from late October to late December.
Strong resistance was found at the Fibonacci retracement level at 1.2922 (50% of the 1.3793 – 1.2061 decline). Further resistance was provided by the 200-day moving average around the same area. The rejection of this resistance zone was a major negative for USDCAD and so there was consequently a break out from the range. The triple top chart formation implies scope for additional losses.
Further support would be expected at 1.2420 and 1.2330 ahead of the 1.2061 low. Near-term resistance is expected at 1.2500 – 1.2550.
Short-term price action may be turning neutral and the market appears to have found support, with risk of a bounce higher. But the overall picture is weak and unless USDCAD can reclaim the 1.27 handle soon, there is risk for more weakening with scope to push towards the low 1.23 area.