EURCAD surged furiously above the 200-period simple moving average (SMA) on the four-hour chart, which has been blocking upside movements over the past few sessions, to print a one-month high at 1.4484.
The market action, however, has not closed above January’s top of 1.4479 and the 61.8% Fibonacci retracement of the 1.4644 – 1.4098 down leg yet. Hence, a downside correction is still looking increasingly likely as the RSI and the Stochastics sail in the overbought area.
In the event the wall at 1.4479 collapses, the price could immediately jump into the 1.2529 – 1.4553 region formed by the 78.6% Fibonacci and the 2021 limits. Crawling higher, the rally could battle the crucial border of 1.4612 and the 1.4644 top before printing a new peak at 1.4726.
If the 1.4479 bar proves a tough obstacle, the pair may reverse south to seek support around the 50% Fibonacci of 1.4372. The 20-period SMA and the 38.2% Fibonacci of 1.4308 could next show up on the radar ahead of the 23.6% Fibonacci of 1.4228.
In summary, the latest sharp bullish run in EURCAD seems to have entered overbought waters, increasing the likelihood for a downside correction near January’s limits.
