USD/CAD traded higher on Tuesday, after it hit support slightly above the 1.2520 barrier, marked by the low of April 14th. That said, the recovery remained limited below 1.2630, and most importantly, below the downside resistance line drawn from the high of May 12th. Thus, with that in mind, we will consider the short-term outlook to still be negative.
The bears may take charge again from near the 1.2630 zone, and perhaps aim for another test near the 1.2520 zone. A break lower would confirm a forthcoming lower low and may target the low of April 21st, at around 1.2455, or the 1.2405 barrier, marked by the low of April 5th. If neither barrier is able to hold, then we could see declines towards the low of November 1st, 2021, at around 1.2350.
Shifting attention to our short-term oscillators, we see that the RSI turned down after it hit resistance near the 50 line, but the MACD, although negative, remains above its trigger line. Both indicators detect downside speed, but the fact that the MACD remains above its trigger line suggests that some further recovery may be in the works before the next leg south.
In order to abandon the bearish case and start examining a potential bullish reversal, we would like to see a clear break above the 1.2685 zone, which is marked as a resistance by the high of June 2nd. This could confirm the break above the aforementioned downside line and may initially target the 1.2770 territory, which provided support between May 20th and 23rd. Another break, above 1.2770, could carry more bullish implications, perhaps aiming for the 1.2870/95 territory, marked by the highs of May 20th and 18th. If the buyers want to add more to their positions, we could see them extending their climb to the peak of May 16th, at 1.2980.
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