USD/CAD traded higher on Tuesday after hitting support fractionally below the psychological zone of 1.3000. However, the recovery was stopped near the 1.3087 level, and today, the rate has been oscillating slightly below that barrier. Overall, USD/CAD continues to trade below the downtrend line drawn from the peak of July 14th, as well as below all three of our moving averages on the 4-hour chart. With that in mind, we would consider the near-term outlook to be negative.
If the bears wake up again soon, we expect them to drive the battle lower, for another test near the 1.3000 barrier. That zone may provide support once again, with the rate rebounding back near the 1.3087 level. That said, as long as the rate would be trading below the aforementioned downtrend line, we would see decent chances for another leg south. This time, the 1.3000 area may get violated, something that could pave the way towards the 1.2960 zone, which provided strong support between December 31st and January 7th. Another break, below 1.2960, could extend the slide towards the low of October 16th, 2018, at around 1.2915.
Shifting attention to our short-term oscillators, we see that the RSI has topped slightly below its 50 line, while the MACD, although above its trigger line, shows signs it could start topping within its negative zone. Both indicators suggest that the rate may start picking up negative speed soon, something which supports the case for a trend continuation.
In order to abandon the bearish case and start examining a trend reversal, we would like to see a strong recovery above 1.3165, a resistance marked by the high of August 27th. The rate would already be above the pre-mentioned downtrend line and the bulls may get encouraged to shoot for the 1.3240 or the 1.3270 obstacles. If the manage to overcome those territories as well, then the advance may continue towards the peak of August 12th, at around 1.3350.
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