USDCAD Gives Up Rally Near Familiar Resistance

Technical analysis of Forex market

USDCAD swiftly bounced back to the 1.2700 territory after almost touching December’s low of 1.2606 last week, but the descending trendline drawn from the top of 1.2962 managed to put the brakes to the rally once again.

The area around 1.2720 has been balancing downside pressures over the past few hours in the four-hour chart. But currently it is giving up, letting the price slide to 1.2700. If the decline continues, the price could take a rest around 1.2678 before heading towards December’s floor of 1.2619 – 1.2606.

Alternatively, if the pair returns above 1.2720, it could fight for a close above the resistance trendline and the 200-period simple moving average (SMA) at 1.2765. The 50-period SMA is within a breathing distance at 1.2775. Therefore, traders may also wait for a move above it before targeting the 1.2800 level. A sharper increase is expected to face some limitations around the 1.2830 barrier.

From a technical perspective, downside risks seem to be greater at the moment given the RSI’s failure to pierce above its 50 neutral mark and the negative slope in the Stochastics.

Summarizing, the bears seem to be gaining ground in the USDCAD market, making a tumble towards 1.2678 highly likely.