USD/CAD traded higher during the European morning Tuesday, after it hit support near Friday’s low of 1.3390. In the bigger picture, the pair continues to trade above the long-term uptrend line drawn from the low of January 31st, 2018, something that keeps the broader outlook positive. That said, in the short run, the pair has been in a corrective mode since Friday when it hit resistance at 1.3465. Bearing in mind that the rate failed to break below 1.3390 yesterday, we believe that the slide may be experiencing its last stages and that another positive leg may be in the works soon.
A decisive move above yesterday’s high of 1.3440 may confirm the case and may allow the rate to challenge once again the 1.3465 hurdle. That said, a break above that zone is needed to confirm a forthcoming higher high and make us more comfortable with the upside. Such a move could pave the way for the psychological zone of 1.3500, the break of which may encourage the bulls to put the 1.3565 zone on their radars. That zone acted as a decent support from December 24th until January 3rd, when it was broken to the downside. Now, it could act as a good resistance area.
Looking at our short-term momentum studies, we see that the RSI hit support near 50 and turned up, while the MACD, although below its trigger line, shows signs of bottoming slightly above zero. These indicators suggest that the rate may start picking up upside speed again soon, which is inline with our view that the latest corrective setback may be at its last stages.
On the other hand, a dip below 1.3375 may signal that the downside correction is not over yet and could initially open the path for the 1.3340 area, marked by the high of February 14th. Another dip, below 1.3340, may extend the slide towards the 1.3305 level, defined by the inside swing high of March 1st, as well as the low of March 5th.
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