USDCAD has come off a 4-week top of 1.2648 brushed yesterday to settle around the 50% Fibonacci retracement of the late July drop, which lies at 1.2614. Technical indicators underscore the waning positive momentum. The stochastics are sliding, with the %K line approaching 50, while the MACD histogram has also started to retreat.
However, the MACD not only remains comfortably in positive territory but also above its red signal line. In addition, the price is holding well above its moving averages (MA), which are all sloped upwards. Hence, the odds for extended losses are low at this point.
Nevertheless, the 20-period MA stands ready to defend the price from selling pressures near the 38.2% Fibonacci of 1.2569. Should this support fail, the 50- and 200- period MAs could halt further declines at 1.2549 and 1.2531 respectively. Lower down, the 23.6% Fibonacci of 1.2512 and the 1.2490 level would be critical in preventing a fresh run towards the three-week trough of 1.2421 from July 30.
If, though, USDCAD regains its bullish momentum, it could re-challenge the 1.2648 high before aiming for the 61.8% Fibonacci of 1.2660. A break above the 61.8% Fibo would leave just the 78.6% Fibo of 1.2724 standing in the way of the July peak of 1.2807, which was a 5-month high.
Should the bulls manage to successfully overcome this high, it would restore the pair’s uptrend, reinforcing the bullish outlook in the medium term. But in the very near-term, the bullish bias is at risk of turning neutral again unless the price is able to reverse sustainably back up soon.
