USDCAD Breaks Long-Term Support, But Wait a Bit

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USDCAD closed marginally below the ascending trendline, which has been navigating the market since the plunge to a 3½-year low of 1.2006 in June 2021.

While the RSI has dipped further in the bearish area, and the MACD has strengthened its negative momentum below its zero and signal lines, the trendline breakout was not sizable and therefore confirmation is required before the spotlight shifts lower to 1.2500. Note that the Stochastics, although below their 20 oversold level, seem to have found a turning point.

Failure to bounce back above the 1.2600 – 1.2625 region, which encapsulates the broken trendline, the 200-day simple moving average (SMA) and the 50% Fibonacci retracement of the 1.2287 – 1.2962 upleg could press the price towards the 61.8% Fibonacci of 1.2500. Lower, the 1.2430 – 1.2450 tight zone could be the last opportunity for a rebound before the way clears towards the 1.2287 trough.

In the event of an upside reversal above 1.2625, the 20- and 50-day SMAs could immediately pause the bull run alongside the 38.2% Fibonacci of 1.2700. If not, the recovery may continue towards the 23.6% Fibonacci of 1.2830, while not far above, traders may pay attention to the tentative resistance trendline at 1.2880 before targeting the top of 1.2962.

All in all, USDCAD has stepped below a long-term supportive trendline, exposing itself to additional declines. Yet the bearish breakout is still at an early stage and only if the 1.2600 – 1.2625 area proves a firm resistance could the sell-off get new legs.