USDCAD bounced to a two-week high of 1.2618 after rising for four consecutive days from a multi-year low below 1.2500.
Momentum signals are shifting from bearish to neutral, suggesting a weakening in downside pressure. RSI has moved out of oversold territory to rise above 30 while MACD has flattened out and is no longer sloping down.
The market was unable to record a daily close above the key psychological 1.2600 level yesterday. This is now a strong resistance level. Breaking above this could see gains towards 1.2700, another important level that was tested in the past. However, prices would need to rise to the 1.3200 handle to weaken the overall bearish market structure on the daily chart.
The technical structure remains bearish since USDCAD is below the daily Ichimoku cloud while the Tenkan-sen and Kijun-sen lines are negatively aligned. Also highlighting the bearish outlook was the crossover of the 50-day moving average below the 200-day MA on July 13.
A rounded low may be developing at just below the 1.2500 level and this may keep the market from extending lower in the near-term but bearish momentum could pick up again if USDCAD breaks support at 1.2500 and falls past the July 27 low at 1.2413. Such a move would accelerate a deeper decline towards the next major trough in the 1.2100 area.
Consolidation is expected in the 1.2500 handle in the near-term. The overall bearish market structure remains intact with no clear signals of a reversal in the underlying trend.
