USD/CAD has been in a sliding mode since Friday, when it hit resistance at 1.2572. Overall, it remains below the downside resistance line drawn from the high of Dec. 20 and below the last upside support line taken from the low of Oct. 21. In our view, this keeps the short-term outlook bearish.
That said, to get confident on a trend continuation, we would like to see a clear dip below the low of Jan. 13, at 1.2453. This will confirm a forthcoming lower low and may allow declines towards the 1.2387 barrier, marked by the low of Nov. 10. If the bears are unwilling to stop there, we may see them diving towards the 1.2327 zone, defined as a support by the low of Oct. 29.
Shifting attention to our short-term oscillators, we see that the RSI lies below 50, but has just ticked up again, while the MACD, although negative, lies slightly above its trigger line. Both indicators detect downside momentum, but the fact that the RSI ticked up and the MACD is still above its trigger line, adds more credence to our view of waiting for a dip below 1.2453 before getting confident on larger declines.
We will start examining the bullish case if we see a strong recovery above 1.2730. This will confirm the rate’s return above the aforementioned diagonal lines and may encourage advances towards the peak of Jan. 6, at 1.2813, or the high of Dec. 29, at 1.2835. If neither territory can stop the advance, then we could see the bulls aiming for the 1.2918 barrier, marked by an intraday swing high formed on Dec. 22.
