- USDCAD in the red after reaching 3-year high
- Aggressive rally since the July 14 low of 1.3091
- Momentum indicators appear to support the current downleg
USDCAD is moving lower today, registering its third consecutive red candle after trading at a 3-year high of 1.3898. It has been an aggressive rally from the July 14 low with the bulls potentially staying on the sidelines this week due to numerous key events. In the meantime, the bullish series of higher highs and higher lows remains intact but a possible shooting star doji today could complicate the outlook.
Amidst this price action, the momentum indicators appear to be favouring the current correction. The RSI is hovering a tad above its midpoint, and the Average Directional Movement Index (ADX) is pointing to an aggressively weakening bullish trend in the market. Interestingly, the stochastic oscillator has crossed below both its moving average and overbought territory, signaling that the current downleg could have legs.
Should the bulls remain in control of the market, they could try to keep USDCAD above the December 16, 2022 high at 1.3704. They could then have a go at overcoming the 1.3807-1.3854 area. If successful, they could have the chance to record a new 2023 high and potentially set their course for the October 13, 2022 peak at 1.3977.
On the flip side, the bears appear determined for the current correction to pick up pace and they could first try to push USDCAD below the 1.3704 level. They could attempt to stage a sell-off towards the 1.3605-1.3635 region that is defined by the 23.6% Fibonacci retracement of the April 5, 2022 – October 13, 2022 uptrend and the 50-day simple moving average (SMA). Lower, the support set by the July 14, 2023 ascending trendline could be stronger than currently anticipated.
To sum up, USDCAD bears are trying to recoup lost ground after the recent strong bullish run, potentially capitalizing on the increasingly negative momentum.