Bulls Pause Briefly Near 61.8% Fibonacci Weekly Drop

• The slightly overbought RSI on the 1 hour chart limits a positive intraday move for the USD / CAD.
• The setup favors the bulls and supports the prospects for a further move to the intraday move.
• A sustained break out of the horizontal support at 1.2650 would negate the constructive outlook.

The USD / CAD pair has stopped its positive intraday movement near the 1.2715 area and has rapidly retraced a few pips after the release of the upbeat Canadian retail sales data. The mentioned region marks the 61.8% Fibonacci retracement of this week’s rejection drop from the round 1.2800 level.

The slightly overbought RSI on the 1 hour chart appears to be the only factor that has limited any further gains for the USD / CAD pair. That said, a sustained move above the 200 hourly SMA would favor the bulls and support prospects for an extension of the recovery from multi-year lows.

The constructive outlook is reinforced by the fact that the oscillators on the 4-hour chart have started to gain bullish traction and have rebounded from negative territory on the daily chart. Therefore, a subsequent positive move, towards the challenge of resistance from a two-month downtrend line, currently around the 1.2765 region, now seems like a clear possibility.

Some subsequent purchases have the potential to push the USD / CAD towards the round 1.2800 level. Momentum could extend towards the 1.2835 region, above which the bulls are likely to aim to conquer the 1.2900 level.

On the other hand, the 38.2% Fibonacci, around the 1.2670 region, now appears to defend the decline. It is closely followed by horizontal support around 1.2650, which if decisively broken will nullify the prospects for further recovery and make the USD / CAD pair vulnerable to further declines.

USD / CAD 1 hour chart

USD / CAD technical levels