USD/CAD traded higher on Tuesday after it hit support slightly above the 1.2520 barrier, marked by the low of Apr. 14. The recovery remained limited below 1.2630 and, most importantly, below the downside resistance line drawn from the high of May 12. Thus, we will consider the short-term outlook to be still negative with that in mind.
The bears may retake charge from near the 1.2630 zone and perhaps aim for another test near the 1.2520 zone. A break lower would confirm a forthcoming lower low and may target the low of Apr. 21, at around 1.2455, or the 1.2405 barrier, marked by the low of Apr. 5. If neither barrier can hold, we could see declines towards the low of Nov. 1, 2021, at around 1.2350.
Shifting attention to our short-term oscillators, we see that the RSI turned down after it hit resistance near the 50 line, but the MACD, although negative, remains above its trigger line. Both indicators detect downside speed, but the MACD remains above its trigger line, suggesting that some further recovery may be in the works before the next leg south.
To abandon the bearish case and start examining a potential bullish reversal, we would like to see a clear break above the 1.2685 zone, marked as resistance by the high of Jun. 2. This could confirm the break above the aforementioned downside line and may initially target the 1.2770 territory, which was a support on May 20 and 23.
Another break above 1.2770 could carry more bullish implications, perhaps aiming for the 1.2870/95 territory, marked by the highs of May 20 and 18. If the buyers want to add more to their positions, we could see them extending their climb to the peak of May 16, at 1.2980.
