Technical Analysis – USDCAD edges sideways near 2-month bottom levels

Anthony Charalambous, XM Investment Research Desk

USDCAD appears to have adopted a neutral nature around the lower levels of the last two months, confined between 1.3330 and 1.3459. The flattening out of the 50-period simple moving average (SMA) and the Ichimoku lines further reflect this view of weak directional momentum.

The short-term oscillators suggest conflicting signals of momentum. Although the RSI points downwards under the 50 threshold, the stochastic oscillator is bullish, coming out of the oversold region. Adding to this, the MACD and red signal line have basically flattened at the zero mark.

If sellers manage to close under the Ichimoku cloud’s lower surface and the 1.3360 obstacle, immediate support may arise from the two-month low of 1.3330. However, should sellers dominate and dive even under the 1.3314 low from June 10, the pair may sink to challenge the 1.3200 February trough.

Otherwise, if buyers resurface and push above the 50-period SMA and the Ichimoku lines around 1.3390, tough resistance may stem from the 1.3459 highs, where the ceiling of the cloud and the 100-period SMA currently reside. Overtaking this border, the 1.3485 level, which is the 23.6% Fibonacci retracement of the down leg from 1.4047 to 1.3314 and the 1.3500 handle may draw traders’ focus. Stepping above, the 200-period SMA at 1.3528 may prevent the climb from gaining ground towards the 38.2% Fibo of 1.3594 and the subsequent 1.3646 peak.

Overall, the very short-term bias remains neutral-to-bearish below the cloud and 200-period SMA. That said, for a clear direction to evolve, the pair may need to break either below 1.3314 or above 1.3715.