USDCAD had its most constructive week since March 2020, rallying by 1.7% to a seven-week high of 1.2382.
The bull run has snapped the one-month-old trading range and sent the price above its 20- and 50-day simple moving averages (SMAs), but a familiar heavy obstacle is currently threatening to put breaks on the rally.
Particularly, the long-term resistance trendline and the surface of the Ichimoku cloud, which have been limiting upside movements over the past eight months, could captivate the pair below the 1.2400 level and within the broad downtrend once again, deterring any progress towards the 1.2500 barrier. Higher, the area around 1.2650 and the 200-day SMA at 1.2700 could set a tougher battle in case of steeper increases.
In momentum indicators, the MACD has jumped into the positive area for the first time since February and is at the highest since September 2020. The RSI and the Stochastics have also accelerated but they have yet to peak in the overbought area, all reflecting a cautiously bullish bias.
Failure to overcome the 1.2400 number could press the price towards the cloud’s bottom line and the former 1.2265 support region, while a close below the protective red Tenkan-sen line at 1.2222 could confirm another negative extension to 1.2160. If sellers persist, the door will open for the 1.2060 handle.
Summarizing, although the short-term bias for USDCAD remains tilted to the upside, the recent advance requires careful monitoring as the price is currently testing a crucial resistance territory. A sustainable move above 1.2400 could amplify buying interest.
