On Wednesday, the Canadian dollar got a helping hand from its Central Bank, which which delivered a “hawkish hike”. CAD had a good run against its US counterpart, until it met its short-term upside support line taken from the low of the 1st of October. This was the area that the bulls took advantage of and pushed the pair back up again that led to a break of the medium-term downside resistance line drawn from the peak of the 27th of June. It seems that the pair could be on the path towards higher areas of resistance that it saw in the first half of September. Hence, we will take the bullish side for now.
Apart from breaking the aforementioned downside resistance line, USD/CAD also made a move above the key resistance area at 1.3130, marked by the high of the 19th of October. The next potential target for the pair could be slightly higher at the 1.3175 obstacle, a break of which could lead the rate towards the next potential resistance zone at the 1.3200 barrier. This barrier managed to hold the rate down through the beginning of September.
The RSI is sitting comfortably above 50 and seems to be aiming to the upside. The MACD is above zero and its trigger line, at the same time pointing higher. Both indicators suggest a positive momentum, which could be in line with the idea, discussed above.
Alternatively, if USD/CAD moves back below the previously mentioned medium-term downside resistance line, this could raise some warning signs in the bull-bloc. Certainly, the pair could continue falling after that, but let’s not forget about the short-term upside support line that USD/CAD bounced off on Wednesday. For us to get comfortable with the downside, we would need to see, not only a drop below that upside line, but also a break below the 1.3015 area, marked by Thursday’s low. This is where more bears could start pulling in and driving USD/CAD towards the 1.2970 zone, a break of which could open the door for a further decline towards the 1.2915 barrier, marked by the low of the 16th of October.
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