USD/CAD has been trading in a consolidative manner since yesterday, staying slightly above the 1.3485 barrier. Overall, after breaking the lower end of the descending triangle that contained the price action from March 31st until May 26th, the rate has been printing lower highs and lower lows below a tentative downside resistance line drawn from the high of May 22nd. So, having that in mind, we would consider the near-term outlook of this pair to be negative.
A clear and decisive break below 1.3485 would confirm a forthcoming lower low and may initially target the high of March 6th, at around 1.3435. If that level is also broken, then we may experience extensions towards the low of that day, at 1.3380. Another break, below 1.3380, could set the stage for further declines towards the 1.3315 zone, marked by the lows of March 2nd and 3rd.
Shifting attention to our short-term oscillators, we see that the RSI has just exited its below-30 territory, while the MACD, although negative, has bottomed as well and just poked its nose above its trigger line. Both indicators detect slowing downside speed and suggest that a corrective bounce maybe on the cards before another leg of selling, perhaps for the rate to challenge the 1.3605 barrier, or the aforementioned downside resistance line.
In order to start examining the prospect of a larger correction to the upside, we would like to see a break above 1.3675. This would place the rate above the downside line and could see scope for upside extensions towards the 1.3740 level, which provided strong support between May 26th and June 1st. If that level is not able to halt the recovery either, then the bulls may climb towards the 1.3860 obstacle, which is also the lower end of the pre-discussed descending triangle.
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