USDCAD pierces bullish flag but caution remains

USDCAD pierces bullish flag but caution remains

USDCAD bounced aggressively by 1.6% on Wednesday to close slightly above the 1.4100 level and the descending channel that seems to be part of a bullish flag pattern.

While the move brought hopes that the trend could improve, the momentum indicators have yet to show clear positive signals. The MACD remains stable below its red signal line, the RSI is shifting south after breaking its 50 neutral mark, and the red Tenkan-sen line continues to hold a downside direction below the blue Kijun-sen.

In case the bears dominate, the surface of the channel seen around 1.4040 should act as resistance to keep the focus on the upside. Otherwise, a drop back into the channel could boost selling pressure probably until 1.3934, which is the 50% Fibonacci retracement of the upleg from 1.3200 to 1.4667. Below the previous low of 1.3854, the door would open for the 50-day simple moving average (SMA) and the 61.8% Fibonacci of 1.3760.

In the positive scenario where the price overcomes the 38.2% Fibonacci of 1.4100 and the middle Bollinger band, the 1.4216 nearby resistance could attempt to halt the move towards the 23.6% Fibonacci of 1.4320. Another winning battle at 1.4320 could add more fuel to the rally, bringing the upper Bollinger band currently at 1.4446 and the 1.4500 mark next into the view.

Meanwhile in the medium-term picture, the pair continues to trade within bullish waters as long as it holds above 1.3500.

Summarizing, USDCAD continues to face downside risks despite completing, though not clearly, a bullish flag pattern. A decisive move above 1.4100 could raise positive sentiment, while a pullback below 1.4040 may confirm additional losses.

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Source: FxStreet

 

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