The USDCAD currency pair has recently shown a notable recovery, rebounding from a seven-month low of 1.3418. By rising above the 20-day exponential moving average (EMA), it has indicated a potential shift in market sentiment. This upward trajectory aligns with a familiar constraining line established since the 2021 lows, showcasing the pair’s resilience amid varying market conditions. The price movement suggests a temporary alleviation of bearish pressures, breaking the recent downtrend and moving towards critical resistance levels.
On the horizon, the price range of 1.3580 to 1.3620 presents a significant challenge, as it encompasses both the 50-day and 200-day EMAs, in addition to the 38.2% Fibonacci retracement of the latest downward leg. Should USDCAD achieve a successful breakthrough of this range, it could pave the way for further upward momentum, targeting the 50% Fibonacci level around 1.3680. The bulls may find themselves eyeing the 61.8% Fibonacci retracement at 1.3740, should they manage to sustain a bullish run. Nevertheless, potential market participants should approach these targets with caution, as technical indicators suggest that the upward movement may be limited.
Despite the recent gains, the overall technical picture remains bearish. The declining EMAs indicate a prevailing downward trend, which could dampen the enthusiasm of bullish market participants. Additionally, the RSI (Relative Strength Index) has not decisively moved above the critical 50 neutral threshold, reflecting a lack of robust momentum. Compounding this, the stochastic oscillator is nearing the overbought territory at 80, suggesting that the market could be approaching a point of exhaustion. These indicators imply that while recent upward movements are noteworthy, they may not be sustainable if the trend signals do not improve.
For those on the selling side, the area around the 20-day EMA at 1.3530 serves as a critical pivot. A decline below this threshold could trigger a more significant bearish reaction. Immediate support appears at the 1.3470 level, which, if breached, may lead to further declines with targets set towards the notable psychological level of 1.3400. Should the bears push prices even lower, the next substantial barrier could rest around 1.3350, a level first touched in January 2024. In this context, sellers may remain inactive until clear bearish signals materialize.
While USDCAD has made an impressive recovery from notable lows, the outlook remains uncertain. The technical analysis signals do not yet support a strong bullish case, and any potential rise might face significant barriers. Therefore, caution is warranted, and traders should carefully monitor the evolving technical landscape to navigate this complex environment effectively. The upcoming release of September’s US nonfarm payroll data will likely serve as a key event, influencing the next movements in the currency pair and overall market sentiment.