- The pair already seems to have found acceptance below 50-DMA support.
- A sustained break below mid-1.3100s eyed for a fresh bearish confirmation.
The USD/CAD pair now seems to have entered a bearish consolidation phase and was seen oscillating in a narrow trading band just above mid-1.3100s, or over one-month lows. Given Friday’s breakthrough 50-day SMA support and a subsequent slide below August monthly swing lows, the set-up already seems to have turned in favour of bearish traders.
Moreover, technical indicators on the daily chart maintained their bearish bias and add credence to the near-term negative outlook. However, slightly oversold conditions on the 4-hourly seemed to be the only factor that held investors from placing aggressive bearish bets and limit any further downside, at least for the time being.
Hence, it will be prudent to wait for a strong follow-through selling below an immediate support near mid-1.3100s before traders start positioning for a further near-term depreciating move. The pair then could slide back towards late July swing lows support near the 1.3100 handle en-route the next major support near the 1.3055-45 region.
On the flip side, the 50-day SMA – currently near the 1.3190 region – now seems to act as an immediate strong resistance, above which a bout of short-covering could lift the pair further towards the 1.3230 resistance zone. Any subsequent recovery now seems more likely to meet with some fresh supply and remain capped near mid-1.3200s.
USD/CAD daily chart