The USDCAD currency pair on the Daily Chart has been following an upward path since 1 June 2021, having found support at the 1.20056 level.
The exchange rate has reached its peak at 1.29477 on 20 August 2021, the high level encouraged bears to enter the market with short positions and as a result, the USDCAD’s exchange rate have depreciated, followed by a pattern of Head and Shoulders with unsuccessfully attempts to record new highs.
Price Chart Analysis
Upon applying Technical analysis on the price chart, one can see that the price managed to close below the 50-period Simple Moving Average line, a fact that also points to the downward direction and the bearish bias in the market.
Additionally, the Relative Strength Index Oscillator registers values below the fifty line, which also confirms the negative sentiment in the market.
The current price stays near the neckline line of the head and shoulders pattern, which also implies that the exchange rate lacks upside momentum and could be ready for a bearish crossover as Loonie continue to gather strength on the back of a softer Dollar.
Both price action on the chart, as well as the indicator, are in agreement in terms of the pair’s downward bias.
Applying the Fibonacci Retracement tool to the low price of the bottom at the price of 1.24924 and dragging it up to the high price of the pattern at the price of 1.28945, three price targets were calculated:
- The first price target is estimated at 1.22439(161.8%).
- The second price target is seen at 1.18418 (261.8%).
- The third price target is projected at 1.11912 (423.6%).
Of course, it remains to be seen whether the crowd psychology as well as the bears’ pressure will manage to maintain the control of the market and pull the USDCAD pair lower.
If the exchange rate fails to make a breakdown to prolong the bearish momentum, traders should watch for a move to retest reaction high of 1.28945 level, where a breakthrough could retain the positive bias.
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