USDCAD Retraces To 1.23 Level Before Foothold Takes Shape

Technical analysis of Forex market

USDCAD is consolidating across the 1.2300 handle after the price slipped back below the Ichimoku cloud and the simple moving averages (SMAs) over a period of one-month. The bullish bearing of the 50- and 100-day SMAs has softened, as has the negative tone of the 200-day SMA, overall signalling that the pair may adopt a more neutral form.

The Ichimoku lines are indicating a pause in downward forces, while the short-term oscillators are conveying conflicting signals in directional momentum. The MACD, some distance below zero, is edging towards its red trigger line, while the RSI’s recent rebound at the 30 level is struggling to make headways. On the other hand, the stochastic oscillator is promoting positive price action, as its bullish charge remains intact.

In the positive scenario, prompt upside constraints could commence from the resistance section of 1.2383-1.2425. Overstepping this barrier, the price may then encounter a zone of resistance between the 200- and 100-day SMA at 1.2488 and 1.2515 respectively. Successfully conquering this too, the bulls could then target the 50-day SMA at 1.2595 ahead of the 1.2647 high.

Alternatively, if negative pressures pick up again, initial support could transpire from the immediate 1.2251-1.2308 region. Diving beneath this zone, which was formed by the lows around the end of June until early July, the pair may meet the 1.2200 handle. Should the round number fail to dismiss further downward pressures, sellers could then turn their focus towards the 1.2127 and 1.2057 lows.

Summarizing, USDCAD’s price outlook remains skewed to the downside. Price action is currently confined between the 1.2251-1.2308 lower limit and the 1.2383-1.2425 upper limit. A clearer price direction could evolve should the pair break either below or above these limits.