USDCAD extended losses for a fourth day on Wednesday, further retracing the upleg from 1.2460 to 1.3187. The market is now testing the 61.8% Fibonacci retracement level at 1.2738. This is an important support level which if broken to the downside, would accelerate a further decline towards the key 1.2600 level.
RSI is trending down and is in bearish territory below 50, suggesting there is risk of further downside. If the pair continues on its downside below 1.2600, there is scope to reach the May 3 low of 1.2460, resulting in a 100% retracement of the May rally, and consequently USDCAD would see a resumption of the longer term downtrend that started from 1.4689.
Prices would need to rise above several barriers in order to shift the bearish bias. To the upside, there is resistance at the 1.2800 level. Above this, the 50% Fibonacci is an important resistance level at 1.2824 and then the 50-day moving average around 1.2884. A successful break above 1.2900 could see prices quickly rise towards 1.3100 and the May 24 peak at 1.3187.
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