USD/CAD – Bears Holding their Line in a Bullish Environment

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USD/CAD - Bears Holding their Line in a Bullish Environment

After the FOMC statement, the USD/CAD fell sharply from just above 1.28 down to 1.2450. After this dramatic slide, price has bounced back to tag 1.2750 before stalling again. In the 1H chart we can see the battle between the bulls and the bears, and so far, after the bullish attack during the 3/19 session, bears seem to be holding their line.

USD/CAD 1H Chart 3/20
usdcad 1h chart 3/20
(click to enlarge)

1) Price held below the cluster of 200-, 100-, and 50-hour SMAs and has returned below the cluster. This shows maintenance of the near-term bearish bias.
2) The 1H RSI has dipped below 20 and is now holding below 60. This reflects maintenance of the bearish momentum from the 3/18 session.

While the bears seem to be holding in the near-term, this appears to be within the context of a larger time-frame, which is still dominated by the bullish mode.

USD/CAD Daily Chart 3/20
usdcad daily chart 3/20
(click to enlarge)

The daily chart shows USD/CAD holding above the 50-day SMA after tagging it. This shows that bulls are still in control of this market. Also, the fact that the RSI held above 40, even 50, shows that the medium-term bullish momentum is still intact.

Indeed, a break below the 1.2350-1.2450 support area will be needed to open up the bearish outlook in the medium-term. So, if we do believe that the short-term outlook is still bearish within a medium-term bullish outlook, we should look for the market to dip but hold above the 1.2350-1.24 area.

To the upside, a clear break above 1.28 should open up the 1.30-1.3060 highs from 2008-2009.

Otherwise, if price does break below 1.2350, the next key level will be the 1.20 psychological handle. The market would be bullish-neutral in the medium-term, but the long-term trend would remain bullish as price would still be above the 100- and 200-day SMA, and the daily RSI would still likely be above 40.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.