USD/CAD edged north yesterday after it hit support near the crossroads of the 1.2820 support and the upside line taken from the low of the 17th of April. However, the rally was stopped by the 1.2990 zone, and then, the rate retreated somewhat to find support at 1.2935. Bearing in mind that the pair continues to trade above the aforementioned upside support line, and that it is now back above all our three moving averages, we see the case for some further advances, at least in the short run.
If the bulls manage to take the reins at current levels, then we would expect them to aim for another test near 1.2990, the break of which may set the stage for the 1.3040 zone, defined by Tuesday’s and Wednesday’s highs. If that area does not prove strong enough from preventing the bulls to drive the battle higher, then we may experience extensions towards our next resistance territory of 1.3100.
Our short-term oscillators support the notion for further advances as well. The RSI rebounded from near its 50 line, while the MACD, although negative, lies above its trigger line and looks ready to obtain a positive sign soon.
On the downside, even if we see the rate retreating below 1.2935, as long as it continues to trade above the upside support line drawn from the low of the 17th of April, we would maintain the view that there is a decent chance for the bulls to jump in. We would like to see a clear dip below 1.2820 before we start examining whether the near-term outlook has turned negative. Such a move could confirm the break of the upside support line and could initially pave the way for our next key support obstacle of 1.2750.
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