Technical Analysis – USDCAD trades lower, tests key support
- USDCAD is in the red today, a tad below 1.3977
- It is testing the support set by a short-term trendline
- Momentum indicators are gradually turning bearish
USDCAD is edging lower today, trading a tad below the October 13, 2022 high at 1.3977. Profit-taking and this week’s stronger Canadian CPI have allowed CAD bulls to record a small correction from the four-year high of 1.4104. With the BoC expected to cut rates again in December, CAD bulls are desperately looking for any additional positive news to stage another downleg in USDCAD.
Meanwhile, momentum indicators are gradually turning bearish. Specifically, the Average Directional Movement Index (ADX) is edging lower towards its midpoint and thus pointing to a weakening bullish trend. Additionally, the stochastic oscillator has broken below its oversold territory (OS) and it is heading lower. Should this move pick up pace, it would be seen as a very strong bearish signal. Interestingly, the RSI remains above its midpoint, but it appears unable to stage a meaningful move higher.
Should the bears remain confident, they could try to push USDCAD below the September 25, 2024 trendline, with the next key support level positioned at 1.3898. Even lower, the busy 1.3807-1.3854 area could prove tougher to overcome than currently envisaged.
On the other hand, the bulls could push USDCAD back above the October 13, 2022 high at 1.3977 again. If successful, the path could then be unhindered until the four-year high at 1.4104, giving them the chance to record a new cycle high.
To sum up, USDCAD bears have staged a small selloff, but they need to overcome a key trendline for the current bearish move
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