USD/CAD opened with a negative gap on Monday and continued to trade south during the European morning, breaking below the uptrend line drawn from the low of the 1st of December. Then, the pair hit support at around 1.3160 and rebounded somewhat, but as long as it trades below the aforementioned uptrend line, we would consider the short-term outlook to be cautiously bearish.
If the bears are willing to jump back into the action soon, then we may see them aiming for another test near the 1.3160 level. A break below that barrier could extend the slide towards the low of the 16th of November, at around 1.3125, where another break may pave the way for the 1.3085 zone, defined by the low of the 8th of November.
Looking at our short-term oscillators, we see that the RSI fell below 50 and hit support near its 30 line, while the MACD lies below both its zero and trigger lines, pointing down. These indicators detect negative momentum and support the notion for further declines. However, the fact that the RSI turned slightly up after hitting its 30 mark suggests that some more recovery may be in the works before the next negative leg, perhaps for the rate to test the prior uptrend line as a resistance.
A break back above that line, or even better above 1.3275, is the move that will make us abandon the bearish case. That said, in order to take the bullish side, we would like to see a decisive break above 1.3360. Such a move would confirm a forthcoming higher high on both the 4-hour and daily charts and may initially open the path for the 1.3420 area, marked by the inside swing lows of the 7th and 9th of June 2017. Another break above that zone could trigger extensions towards the peak of the 12th of that month, at around 1.3475.
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