USDCAD had been trending higher in the short term after finding its feet at the 10-month low of 1.3091 in mid-July. Moreover, the pair has sliced through important technical zones such as both the 50- and 200-day simple moving averages (SMAs), while posting a fresh 2-month high in today’s session.
The momentum indicators currently suggest that the recent rally could be overstretched. Specifically, the MACD is strengthening above zero and its red signal line at its highest level since March, while the RSI is hovering within its 70-overbought territory.
Should the bulls conquer the crucial 1.3550 zone, immediate resistance could be found at the April peak of 1.3666. Jumping above the latter, the pair may ascend towards the 1.3700 psychological mark, which held strong in December 2022. Further advances could then cease at the 2023 high of 1.3860.
Alternatively, if the recent advance fizzles out, the price may retrace lower to test the 1.3385 resistance, which could serve as support in the future. A violation of that territory could open the door for the April bottom of 1.3300. Failing to halt there, the pair could attempt to halt its retreat at the February low of 1.3262.
In brief, USDCAD has been staging a strong comeback, which accelerated after the pair pierced through the ascending trendline that connects its higher lows from November 2022 until early May. However, a pullback should not be ruled out as the price has approached overbought conditions.
