USD/CAD surged yesterday, after it hit support near the 1.3185 area. The rally continued during the Asian morning today as well, but the rate hit resistance near 1.3315 and then it retreated somewhat. Overall, the pair continues to print higher peaks and higher troughs above the uptrend line drawn from the low of July 18th, and thus, we would see a positive near-term picture.
We would expect the bulls to take the reins again soon and aim for another test near the 1.3315 hurdle. If they are not willing to stop there this time around, a clear and decisive break of that resistance may set the stage for extensions towards the 1.3365 level, defined by an intraday swing low formed on June 19th, or towards the 1.3385 obstacle, marked by the peak of that day.
Taking a look at our short-term oscillators though, we see a decent chance for the current retreat to continue for a while more before the bulls decide to shoot again. The rate could perhaps test the 1.3265 level, which is marked by the inside swing high of August 2nd, or the 1.3245 area, defined by the peak of the next day. The RSI turned down after it hit resistance near its 70 line, while the MACD, although above both its zero and trigger lines, has started to slow down.
Having said all that, in order to scrap the bullish case, we prefer to wait for a dip below 1.3185, the area which provided strong support from August 1st until yesterday. Such a dip would also bring the rate below the uptrend line dawn from the low of July 18th and may initially pave the way towards 1.3125. Another break, below 1.3125, could extend the slide towards the 1.3100 area, which is slightly below the low of July 31st and slightly above the inside swing highs of July 17th and 18th.
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