USD/CAD traded lower yesterday and today in Asia, after it hit resistance near the 1.2785 zone, which is the upper bound of the sideways range that has been containing the price action since January 26th. Today, the rate fell below the 1.2720 barrier, marked by yesterday’s low and it looks to be heading towards the 1.2664 zone, or the lower end of the range, at around 1.2648. That said, until we see a clear dip below that hurdle, we will stay neutral.
A clear and decisive dip below 1.2648 would confirm the downside exit out of the range and may initially pave the way towards the low of January 26th, at 1.2560. If the bears are not willing to stop there, then a break lower could see scope for larger declines, perhaps towards the 1.2453 territory, which acted as a support between January 13th and 20th.
Shifting attention to our short-term oscillators, we see that the RSI turned down, fell below its 50 line, and continues to point south, while the MACD, although fractionally positive, lies below its trigger line, ready to dive into the negative territory. Both indicators suggest that the rate has begun, or is about to begin, gathering negative momentum, which adds to the likelihood of further declines. However, we stick to our guns that, in order to get confident on the downside, we would like to see a clear dip below 1.2648.
The outlook could change to positive upon a break above the upper end of the range, at around 1.2785. The bulls could then get encouraged to aim for the 1.2813 barrier, or the 1.2835, marked by the highs of January 6th and December 29th respectively. Now, if neither barrier is able to halt the advance, then we could see bullish extensions towards the 1.2918 zone, marked by an intraday swing high formed on December 22nd. If the buying activity stays strong, even near that level, then a break higher could aim for the peak of December 20th, at 1.2965.
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