USD/CAD tumbled yesterday, breaking below the short-term uptrend line drawn from the low of July 18th. The slide continued thereafter, with the rate falling below the key support of 1.3250, and thereby signaling a possible reversal to the downside. So, having the aforementioned technical signs in mind, we will adopt a bearish stance for now, at least with regards to the short-term picture.
If the bears are willing to stay behind the steering wheel, we may see them extending the fall towards the 1.3195 level, or the 1.3178 zone, marked by the low of August 5th. They may decide to take a break around those levels, thereby allowing the rate to rebound somewhat, but as long as USD/CAD stays below the prior uptrend line, we would consider any recovery to be short-lived and followed by another negative leg. The forthcoming decline may drive the rate below 1.3178, a break which could see scope for larger extensions, perhaps towards the 1.3125 obstacle, or towards the low of July 31st, at around 1.3105.
Turning attention to our short-term oscillators, we see that the RSI lies below 50, close to its 30 line, while the MACD stands below both its zero and trigger lines. Both indicators detect downside speed, but bearing in mind that the RSI has ticked up from slightly above 30, we are cautious that minor corrective bounce above 1.3250 may be looming before the bears decide to shoot again.
In order to start examining whether the outlook has turned back to positive, we would like to see a strong recovery above the 1.3340 area, which has been acting as a ceiling since August 7th. Such a move may confirm a forthcoming higher high on both the 4-hour and daily charts and perhaps pave the way towards the high of June 19th, at around 1.3385. Another break, above 1.3385, could see scope for extensions towards the 1.3420/35 zone, which provided strong resistance between June 14th and 18th.
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