- USD/CAD’s Asian session pullback has confirmed bullish exhaustion.
- A convincing close in the red on Monday would put sellers into the driver’s seat.
USD/CAD is currently trading at 1.3338, having hit a high of 1.3438 in early Asia.
The 100-pip drop has added credence or confirmed buyer exhaustion signaled by Friday’s classic doji candle.
Further, if the Asian session drop is held through the rest of the day, a bearish divergence of the 14-day relative strength index would be confirmed. The bearish divergence occurs when the index produces lower highs, contradicting higher highs on price and is considered a sign of bearish-to-bullish trend change.
A bearish divergence, if confirmed, would imply the rally from the Dec. 31 low of 1.2952 has ended and would shift risk in favor of a drop to the ascending trendline rising from Jan. 7 and Feb. 21 lows. Currently, the trendline support is located at 1.3250.
However, if the daily candle ends with a long upper wick, the bias would turn bullish and the focus would shift to the psychological resistance at 1.35.
Daily chart
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Trend: Teasing bearish reversal
Technical levels
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