USDCAD completed a bearish head and shoulders structure following the rejection near the 50-day simple moving average (SMA) and the crash below the 1.3500 neckline on Thursday.
The price marked a new two-month low of 1.3291 on Friday, stretching its losses below the crucial long-term resistance line and the 50% Fibonacci retracement of the 2020-2021 steep downtrend at 1.3330.
Despite the freefall, the technical oscillators signal that the sell-off is not over yet. Particularly, with the MACD gaining extra negative momentum within the bearish area and the RSI pointing downwards below its 50 neutral mark, the odds are favouring the bears. Also, the latter has yet to reach its 30 oversold level, while the stochastics, although below 20, show no clear trajectory.
If the bearish scenario unveils, the next stop could be around the 1.3222 level, where July’s and September’s bullish actions peaked. The 38.2% Fibonacci retracement of the 1.2006–1.3976 uptrend is positioned in the same location. Crossing below that base, the price may seek shelter near the 1.3120 barrier before testing the key 1.3026–1.3000 region. The latter may attract extra attention as the tentative support trendline from June, the 50% Fibonacci, and the 200-weekly SMA all align here. Note that the 200-day SMA is also approaching that zone.
In case the dollar rebounds back above 1.3330, it may aggressively drive towards the 1.3500 neckline and the 50-day SMA, unless the 1.3425 support turns resistance. A decisive close above the 20-day SMA at 1.3588 may produce another bullish extension to 1.3700–1.3745.
All in all, USDCAD is in a bearish situation, flagging a downward trend reversal and more losses ahead. Another negative extension and, more importantly, a break below 1.3222 would downgrade the bullish medium-term outlook to neutral.
