USDCAD is in a clear downtrend after making lower highs and lower lows for the past two months. On the 4-hour chart, the downside bias is showing signs of exhaustion though. A low of 1.2480 was reached on July 25 and the market is expected to consolidate around this level in the near term.
The MACD is indicating divergence, as it is sloping upwards while USDCAD is sloping downwards. This suggests that downside is limited for now and short-term bottoming is possible to turn the bias back to the upside as long as support holds at 1.2480. Of course, the round-level at 1.2500 is an important area around which prices are pivoting.
Upside moves may be limited as the market is capped by the falling 20-period moving average. Key resistance levels are located at 1.2700 and 1.2945.
The technical picture remains bearish, as the 20SMA is sloping downwards and both RSI and MACD are in bearish territory (below 50 and below zero respectively). Further downside cannot be ruled out at this stage as there are no signs of a reversal in the current downtrend. A break below the July 25 low of 1.2480 would open the way towards the May 2016 low of 1.2460.
