We’ve been tracking the USD/CAD consistently over the last two weeks as the pair has struggled to break above key resistance at 1.0985 (see “USD/CAD Pressing Critical 1.0985 Barrier Ahead of U.S. Data” and “USD/CAD: Short-Term Double Top Activated on Drop Below 1.0900” below for more).
In all, bears were able to repel four separate rallies into that barrier, and rates finally dropped below 7-week bullish trend line support in today’s Asian session.
From a technical perspective, bears clearly have the upper hand. The pair put in a large 4-hour Bearish Marubozu Candle*as rates broke below the trend line, indicating strong selling pressure and hinting that the USDCAD is likely to head lower today.
Meanwhile, the RSI indicator broke below the 40 level, which had provided consistent support throughout the recent bullish run. Further bolstering the bearish case, the MACD indicator is now trending lower below both its signal line and the “0” level, showing clearly bearish momentum.
* A Marubozu candle is formed when prices open very near to one extreme of the candle and close very near the other extreme. Marubozu candles represent strong momentum in a given direction.