Technical Analysis – USDCAD’s negative tempo diminishes; downside risks remain

Anthony Charalambous, XM Investment Research Desk

USDCAD appears to be in the process of finding some footing on the 100-period simple moving average (SMA), after pulling back below the Ichimoku cloud and the 50-period SMA around 1.2818, in the four-hour chart. The strengthening 50-period SMA and the gradual softening downward tone of the 100- and 200-period SMAs, seem to be assisting the pair into a more sideways motion.

However, the short-term oscillators are leaning towards the downside. The MACD and the red trigger line are in the vicinity of the zero mark, with the MACD ever so slightly below, while the RSI is decreasing in bearish territory. Furthermore, endorsing negative sentiment is the bearish demeanour of the stochastic oscillator and the dipping of the %K line below the 20 level.

If selling interest picks up, immediate downside limitations may develop from the 100-period SMA and adjacent support zone of 1.2772-1.2792. Should the bears manage to plunge beneath, the price could dive towards the multi-year low of 1.2687. Should the near 32-month trough fail to terminate the decline, the price could then target the 1.2628 barrier, identified in April 2018.

Otherwise, a bounce off the 100-period SMA and adjoining base could see buyers face early resistance at the 50-period SMA and cloud’s lower surface, around 1.2818. Pushing higher, the red Tenkan-sen line at 1.2840 could be the next obstacle, ahead of the blue Kijun-sen line at 1.2868 and the nearby high of 1.2875. Stepping above this too, the bulls may aim for the 200-period SMA at 1.2915 before the resistance section of 1.2933-1.2958 draws traders’ attention.

Summarizing, in spite of some consolidation within the pair, the deflection off the 200-period SMA looks to have preserved the negative bias. A break below 1.2772 could reinforce the negative picture, while a jump above 1.2958 may reinject confidence into the pair.