USD/CAD traded lower yesterday, breaking below the critical support barrier of 1.2560, initially marked by the low of Jan. 26, and tested again several times this week. This, combined with the fact that the rate is trading below the lower end of the sideways range that contained most of the price action from Jan. 26 until Mar. 17, paints a negative short-term picture.
Despite a subsequent bounce, we believe that the dip below 1.2560 may have opened the way towards the 1.2453 zone, which is marked as a support by the lows of Jan. 13, 19, and 20. If that key zone fails to provide support this time, we may experience extensions towards the 1.2387 barrier, marked by the low of Nov. 10, which could allow a test at the 1.2327 level, defined by the low of Oct. 29.
Shifting attention to our short-term oscillators, we see that although the RSI rebounded from slightly below 30, it turned slightly down again. In contrast, the MACD, already negative, had also turned south and just crossed below its trigger line. Both indicators detect downside speed and support the case for further declines in this exchange rate.
We will abandon the bearish case only if we see the rate returning within the aforementioned range, in other words, breaking above the 1.2665 barrier. This may encourage more advances within that range, initially towards the 1.2695 level, marked by the inside swing low of Mar. 11.
A break of which could extend the advance towards the 1.2737 level, marked by the low of Mar. 14. Another break, above 1.2737, could aim for the 1.2785 zone, which acted as the upper end of the range, as mentioned earlier.
