USDCAD pauses rebound near key resistance trendline
Market sentiment remains fragile below 1.3440
USDCAD could not climb into the 1.3400 zone despite the slight positive surprise in the US CPI inflation numbers on Thursday, staying below the ascending trendline drawn from November 22.
The pair also seems to be trapped between the upper 2021 ascending trendline around 1.3440 and the constraining line from November 2022 near 1.3345.
Encouragingly, the price has built a floor around the 23.6% Fibonacci mark of the November-December downtrend to close above the 20-day simple moving average (SMA) after two months. Despite that, the RSI has yet to enter the bullish territory above 50, while the stochastic oscillator seems to have already started a new bearish cycle, suggesting that sellers could remain active in the market.
Should the current weakness in the price extend below the 1.3325-1.3345 region, the focus could turn to the falling line from early November at 1.3277. If the bears ignore that barrier too, the pair might seek support near the lower 2021 ascending trendline at 1.3225, a break of which could bring December’s floor of 1.3176 back under the spotlight.
On the upside, the bulls will need to pierce through the 1.3440 wall and the 38.2% Fibonacci mark to speed up to the 50-day SMA and the 50% Fibonacci of 1.3537. Additional gains from there could stabilize somewhere between the tentative descending trendline from November’s highs at 1.3590 and the 61.8% Fibonacci of 1.3622.
In summary, USDCAD has not escaped negative risks despite starting the year on a good note. A decisive close above 1.3400-1.3440 could resume buying confidence in the market.
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