USDCAD had been stuck in a steep uptrend after finding its feet at the 10-month low of 1.3091 in mid-July. Moreover, the pair has sliced through important technical zones such as both the 50- and 200-day simple moving averages (SMAs), while posting consecutive fresh two-month highs in the last few daily sessions.
The momentum indicators currently suggest that the recent rally could be overstretched. Specifically, the MACD is strengthening above zero and its red signal line at its highest level since March, while the RSI is hovering within its 70-overbought territory.
Should the bulls attempt to push the price higher, immediate resistance could be found at the April peak of 1.3666. Breaking above that region, the pair might ascend towards the 1.3700 psychological mark, which held strong in December 2022. Further advances could then cease at the 2023 high of 1.3860 registered in March.
Alternatively, if the recent rally fizzles out, the price may retrace lower to test the recent support of 1.3496. A violation of that territory could open the door for the May resistance of 1.3385, which could now serve as support. Failing to halt there, the pair could extend its retreat towards the April bottom of 1.3300 ahead of the February low of 1.3262.
In brief, USDCAD has been staging a strong recovery, which accelerated after the pair pierced through the ascending trendline that connects its higher lows from November 2022 until early May. However, traders should not rule out a correction as the price has approached overbought conditions.
