USDCAD recently experienced a flash drop to 1.3454 but managed to recover successfully. The pair closed Thursday’s session above both the 50-day and 200-day Simple Moving Averages (SMAs), indicating a strong bullish momentum. This recovery has allowed USDCAD to maintain its position within a short-term bullish channel.
On Friday, the bulls took charge and drove the pair above the 20-day SMA and the 50% Fibonacci retracement level of the November-December downtrend. This level has been a significant resistance zone since the beginning of the year. The recent bullish movements have heightened expectations for further progress towards the upper boundary of the channel at 1.3655. However, there are mixed signals that warrant caution.
Although USDCAD has shown strength in surpassing key SMAs and Fibonacci levels, the current neutral trend in both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicators raises uncertainty. Prior to a potential channel breakout, the bulls will need to overcome the 61.8% Fibonacci level at 1.3622.
If the bulls manage to break out of the channel, they may face resistance around the 1.3700-1.3745 region, followed by a level near 1.3800. Conversely, a drop below the crucial support area of 1.3445-1.3470 could lead to a retreat towards the 1.3345-1.3380 territory, where the 23.6% Fibonacci retracement level is situated. Further downside pressure could drive the pair towards the ascending trendline at 1.3300, connecting the lows of 2021 and 2022.
While USDCAD has shown resilience and strength in surpassing key technical levels, the mixed signals from the RSI and MACD indicators suggest caution. Traders should closely monitor the 61.8% Fibonacci level and the upper boundary of the bullish channel for potential breakout and reversal points. It is essential to consider both the bullish and bearish scenarios to make informed trading decisions in the volatile forex market.
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