The USDCAD currency pair has recently seen an impetus, surging to a commendable 3-year apex of 1.3898. However, the recent trading activity reveals a downward tilt, marking its third successive decline. This comes after a substantial leap from its nadir on July 14 at 1.3091. While the upward trajectory has been aggressive, market speculators suggest the bulls might be practicing caution this week due to impending key events.
Diving Deeper into the Price Dynamics:
- Historical Patterns: The bullish trend, characterized by consecutive higher highs and higher lows, remains unbroken. Yet, the emergence of a possible shooting star doji in the current trading environment might introduce an element of unpredictability to the market sentiment.
- Momentum Indicators and Their Implications: There's a palpable shift in momentum, leaning towards a potential correction. The Relative Strength Index (RSI) is slightly north of its median, indicating a balanced momentum. Meanwhile, the Average Directional Movement Index (ADX) suggests a marked erosion in the bullish momentum. The stochastic oscillator's recent movement—crossing beneath both its moving average and the overbought zone—further bolsters the argument for a continued bearish turn.
- Bullish Outlook: If the bulls continue to steer the market, they might focus on maintaining the USDCAD's position above the high seen on December 16, 2022, at 1.3704. Overcoming the 1.3807-1.3854 resistance might pave the way for a new pinnacle in 2023, potentially even challenging the peak achieved on October 13, 2022, at 1.3977.
- Bearish Scenario: On the contrary, bearish forces seem to be mobilizing for a corrective phase. Their initial objective might be to pull the USDCAD beneath the 1.3704 threshold. A concerted effort might see them targeting the 1.3605-1.3635 sector, which aligns with the 23.6% Fibonacci retracement of the upward trajectory from April 5, 2022, to October 13, 2022, and is further anchored by the 50-day Simple Moving Average (SMA). Notably, the ascending trendline support from July 14, 2023, might present a more formidable barrier than previously considered.
While the USDCAD experienced a notable bullish advance, recent patterns suggest the bears are mounting a comeback. With several critical events on the horizon and evident shifts in momentum indicators, traders should tread cautiously, staying attuned to both technical and fundamental signals to navigate the evolving landscape.