USD/CAD traded higher yesterday, after hitting support near the upside line drawn from the low of June 9th. That said, today in Asia, the rate hit resistance near 1.2710 and retreated somewhat. In any case, as long as the rate keeps trading above the upside line, we will hold a positive stance.
The bulls could soon regain control and push the action above the 1.2710 barrier, a move that would confirm a forthcoming higher high on the 4-hour chart and may open the way towards the peak of July 19th, at around 1.2810. The bulls may decide to take a break after testing that barrier, thereby allowing a corrective setback. However, if they recharge from above the upside support line, we could see another leg north and a break above 1.2810. Something like that could see scope for upside extensions towards the peak of August 20th, at 1.2947.
Shifting attention to our short-term oscillators, we see that the RSI ticked up after hitting support near 50, while the MACD lies above its trigger line and appears ready to obtain a positive sign very soon. Both indicators suggest that the pair may start picking up upside momentum again soon, which supports the notion for further advances in the short run.
Now, in order to start examining the bearish case, we would like to see a dip below 1.2533. The rate would already be below the aforementioned upside lien drawn from the low of June 9th, and the bears may decide to initially push towards the low of August 5th, at 1.2475. If they don’t stop there, we could see the slide extending towards the 1.2423 barrier, near the low of July 30th, the break of which could target the 1.2375 barrier, slightly above the inside swing high of July 5th. If the bears are yet to run out of fuel, the next stop could be at 1.2300, a territory defined as a support by the low of July 6th.
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