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Technical Analysis – Does the current impressive USDCAD rebound have legs?
August 9, 2023 1:25 pmVideo
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USDCAD is moving higher again today, but the 200-day simple moving average (SMA) appears to limit the bulls’ appetite. This is actually the seventh consecutive green candle recorded since August 1. This is a rare event for this pair but clearly reflects the prevailing bullish sentiment. Additionally, the recent bearish series of lower lows and lower highs has been broken and, instead, a double bottom pattern has formed with a tentative target in the 1.3690 region.
In the meantime, most momentum indicators are openly supportive of the current upleg. The Average Directional Movement Index (ADX) is confirming the presence of a strong bullish trend in the market, and the RSI is trading at its highest level since mid-March 2023. However, the stochastic oscillator is once again potentially trying to spoil the party. This indicator is hovering at its overbought territory, raising some initial questions about the sustainability of the current rally.
Should the bulls still feel confident, they would try to push USDCAD above the busy 1.3450-1.3504 area that is populated by the 200-day SMA and the October 4, 2022 low. They could then have a go at the 23.6% Fibonacci retracement of the April 5, 2022 – October 13, 2022 uptrend at 1.3605, before setting their eyes on a bigger prize, the December 16, 2022 high at 1.3704.
On the other hand, the bears are trying to defend the 200-day SMA area. If successful, they seem keen on recording a small pullback towards the 1.3375-1.3390, defined by the 38.2% Fibonacci retracement and the 100-day SMA respectively. They could then have a look at pushing USDCAD even lower, towards the key 1.3190-1.3266 range.
To sum up, USDCAD bulls have staged an impressive rally over the past few days. But they still need to overcome some key resistance levels to avoid seeing their efforts going down the drain quickly.
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