USD/CAD traded higher today, after hitting support near the 1.2620 level on Friday. Overall, the pair remains above the upside support line drawn from the low of October 21st, but also below the downside line taken from the high of December 20th. So, bearing in mind that it remains between those two diagonal lines, we will consider the short-term picture to be neutral for now.
In order to get confident with regards to an uptrend continuation, we would like to see a clear break above the 1.2772, a barrier which provided support on December 27th and 30th. This move may confirm the break above the downside line taken from the high of December 20th. The bulls may then get encouraged to aim for the 1.2835 zone, which acted as a ceiling between December 24th and 29th. If they are not willing to stop there either, we may see them climbing to the 1.2918 level, or even the peak of December 20th, at 1.2965.
Taking a look at our short-term oscillators, we see that the RSI, although below 50, rebounded back above 30 and points up, while the MACD is negative, but turned up as well and crosse above its trigger line. Both indicators suggest that the downside momentum is easing but has yet to turn positive. That’s another reason we prefer to stand pat for now.
In order to start examining the bearish case, we would like to see a clear dip below 1.2620. This could also take the rate below the upside line taken from the low of October 21st, and perhaps initially target the 1.2590 barrier. A break lower could carry more negative implications, perhaps targeting the low of November 17th, at 1.2540. If the bears don’t stop there, then we may see extensions towards the 1.2500 zone, or the 1.2480 barrier, marked by the inside swing high of November 5th.
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