USD/CAD has been in a recovery mode since yesterday, when it found support near the crossroads of the 1.3070 level and the uptrend line drawn from the low of the 17th of April. Bearing in mind that the rate continues to trade above that line, we would consider medium-term outlook to stay cautiously positive.
The rate now looks to be headed towards the 1.3160 resistance zone, and if the bulls are strong enough to overcome it, then we may see them driving the battle higher, perhaps for a test near the 1.3225 hurdle, defined by the peak of the 2nd of July. Another break above that level could pave the way for our next resistance of 1.3265.
Turning attention to our short-term oscillators, we see that the RSI edged north and just poked its nose above its 50 line, while the MACD, although negative, stands above its trigger line and points up. What’s more, there is positive divergence between both these indicators and the price action. All these momentum signs corroborate our view that USD/CAD may be poised to continue drifting higher, at least for a while more.
On the downside, if the bears manage to take charge from current levels, we may see them aiming for another test near the aforementioned uptrend line. That said, even if this is the case, we would still see a cautiously positive picture as the bulls may once again take advantage of the rate’s proximity to the trendline. We would like to see a clear dip below 1.3045 before we start examining the case of a trend reversal. Such a dip may set the stage for extensions towards our next support territory, near 1.2960.
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