Technical Analysis – USDCAD picks up momentum as July’s trading kicks off

USDCAD started July’s trading on a positive note on Friday after halting its latest bearish correction around June’s support zone of 1.2863, and marginally above its 20- and 50-day simple moving averages (SMAs).

The RSI has avoided a drop below its 50 neutral mark and is currently looking for a rebound, while the Stochastics have also shifted northwards, both endorsing the bullish action in the price.

On the other hand, the MACD is still slightly below its red signal line, preserving some caution, and that seems reasonable as the price is quickly approaching a short-term tentative resistance trendline (more visible in the four-hour chart). The 23.6% Fibonacci retracement of the latest sharp rally from 1.2516 to 1.3077 is in the neighborhood as well, at 1.2945. Hence, traders may wait for a successful move above that bar before targeting the tough resistance zone at 1.3026. Notably, this is where the 200-weekly SMA and the 38.2% Fibonacci of the 2020 sell-off are placed. Hence, any violation here may trigger another exciting bullish phase.

In the event of a downside reversal, the pair may initially retest the foothold at 1.2863, where the 38.2% Fibonacci is located. If selling pressures overwhelm, the next destination could be the  1.2800 psychological mark and the 50% Fibonacci, a break of which could squeeze the price towards the 61.8% Fibonacci of 1.2695 and the 200-day SMA.

Meanwhile, in the long-term picture, the outlook has neutralized following the slide below the 1.2950 area.

Summarizing, the short-term bias is viewed as positive-to-neutral since the latest bullish action still requires confirmation with a move above 1.2945.

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