(MENAFN- DailyFX) Canadian Dollar Talking Points
USD/CAD clears the 2021 high (1.2964) as it appreciates for seven consecutive weeks, but the rally in the exchange appears to be stalling as the Relative Strength Index (RSI) reverses ahead of overbought territory.
Technical Forecast for Canadian Dollar: Neutral
USD /CAD climbs to a fresh yearly high (1.3077) in May amid the weakness across commodity bloc currencies, and the Canadian Dollar may continue to depreciate against its US counterpart as the Greenback benefits from the deterioration in risk appetite.
As a result, a further decline in benchmark equity indices may push USD/CAD toward the October 2020 high (1.3390), with recent developments in the 50-Day SMA (1.2693) offering a bullish outlook for the exchange rate as the moving average develops a positive slope.
USD/CAD Rate Daily Chart
Source: Trading View
The rally in USD/CAD materialized following the failed attempt to test the April low (1.2403), with the exchange rate clearing the 2021 high (1.2964) as it climbs to a fresh yearly high (1.3077).
In turn, USD/CAD may attempt to test the October 2020 high (1.3390), but the bullish momentum appears to be abating as the recent rally in the exchange rate fails to push the Relative Strength Index (RSI) above 70.
With that said, USD/CAD may face a near-term pullback as the RSI reverses course ahead of overbought territory, and lack of momentum to hold above the 1.2980 (61.8% retracement) region may push the exchange rate toward the Fibonacci overlap around 1.2830 (38.2% retracement) to 1.2880 (61.8% expansion).
A break/close below the 1.2770 (38.2% expansion) raises the scope for a test of the monthly low (1.2714). with the next area of interest coming in around 1.2620 (50% retracement) to 1.2650 (78.6% expansion).
--- Written by David Song, Currency Strategist
Follow me on Twitter at @DavidJSong
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