The USD/CAD has been bearish since edging out anew high on the year at 1.2834. Since then it has broken below a multi-month consolidation and made a low last week at 1.2085. Then, it started to drift sideways and slightly upwards in consolidation. After a rebound to 1.2305, it started drifting lower and today (4/23) USD/CAD fell below some key support levels within the consolidation structure, signaling a bearish continuation.
Now, if price rebounds back above 1.2250, we might need to shelve the bearish outlook for a bullish correction, or large consolidation mode.
As we can see in the 1H chart, the market never really became bullish. Price for the most part held under the 100-, and 50-hour simple moving averages, and didn’t even test the 200-hour SMA. The RSI cracked 60, but didn’t tag 70, so even though USD/CAD lost some bearish momentum this past week, it did not have bullish momentum. Now that the RSI is back below 30, the bearish momentum has been revived.
Most importantly, there seems to be some return of volatility and its downwards. A rising speedline, and a support pivot at 1.2178 are both broken, exposing USD/CAD to the bearish continuation scenario.
The daily chart shows a clear topping action after price consolidated for a couple of months. The short to medium-term is now bearish as price crosses below the 50- and 100-day SMA and as the daily RSI falls below 40. In the longer medium-term, the market might still be bullish, so we should limit the bearish outlook.
First, we should consider the 1.20 psychological level as possible support. Below that, the next important support pivot will be around 1.18. The broken consolidation structure, price top, had a range a little more than 450 pips form just below 1.24 to 1.2835. If we project 250 pips from the 1.24 common support, we would be looking at he 1.1950 area. Basically, because of the prevailing uptrend, the support factors, and the breakout projection, we should expect buyers between the 1.18 and 1.20 area.
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