USD/CAD traded higher today after it hit support near the 1.3242 level. However, the rate continues to trade below the prior upside support line drawn from the low of September 1st, and thus, even if the recovery continues for a while more, as long as the pair trades below that line, we would consider the short-term outlook to be negative.
That said, in order to get confident on more declines, we would like to see a decisive dip below 1.3242. Such a break would confirm a forthcoming lower low and may initially target the inside swing high of September 18th, at 1.3210. If that barrier doesn’t hold, the slide may continue towards the low of September 21st, at around 1.3173. The bears may decide to take a small break after testing that zone, thereby allowing the rate to rebound somewhat. However, such a recovery may be just a corrective bounce before the next leg south, which could take USD/CAD below 1.3173, potentially opening the path towards the low of September 18th, at 1.3137.
Shifting attention to our short-term oscillators, we see that the RSI rebounded from slightly above its 30 line, while the MACD remains below both its zero and trigger lines. Both indicators detect negative momentum, but the RSI’s rebound suggests that today’s recovery in the pair may continue for a while more before the bears decide to take the reins again.
In order to start examining the bullish case, we would like to see the recovery extending above 1.3330. This would also take the rate back above the aforementioned upside support line and may target the 1.3355 hurdle, which provided support on September 28th and 29th. Another break, above 1.3355, could carry larger bullish implications, perhaps setting the stage for the 1.3420 territory, which prevented the pair from moving higher between September 24th and 30th.
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