USD/CAD has been in an upside trajectory since the beginning of October. Last Thursday, the pair surged after it found support near the uptrend line drawn from the low of the 1st of October, broke above 1.3175, but hit resistance slightly above 1.3225 and then it retreated somewhat. The rally above 1.3175 has confirmed a forthcoming higher high on the 4-hour chart, which combined with the fact that the rate continues to trade above the aforementioned trendline suggests that there is scope for more upside extensions.
If the bulls are strong enough to take charge again soon and drive the battle decisively above 1.3225, then we may see them targeting the 1.3290 territory, defined by the highs of the 19th and 20th of July. Another break above that zone could carry more bullish extensions, perhaps towards the high of the 28th of June, at around 1.3350.
Shifting attention to our short-term momentum studies, we see that the RSI, already above 50, has turned up again, while the MACD lies above both its zero and trigger lines, but it is running flat. Both indicators detect upside speed and support the case for further advances, but the fact that the MACD is flat make us cautious of a possible setback before the next positive leg.
That said, even if the rate dips back below 1.3175, we would still see a cautiously positive picture. In our view, there would still be a decent chance for the bulls to take the reins from near the crossroads of the 1.3130 support and the uptrend line. We believe that a clear dip below 1.3130 is needed before we start examining whether the bulls have abandoned the battle, at least in the near term.
Such a break is likely to lead to a test of the 1.3085 level, defined by the low of the 8th of November. Nevertheless, we would like to see a clear move below 1.3055 before we assume the completion of a trend reversal. Such a break would confirm a forthcoming lower low and may pave the way for the low of the 25th of October, at around 1.3015.
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