USD/CAD – Back into bearish territory?

Can it break key support?

The rally in USDCAD has lost momentum over the last couple of months, perhaps a sign that the correction is drawing to a close.

The pair only recently broke above the 200/233-day SMA band, giving the impression that the correction had only just started. But then it failed to make a new high last week and now it’s testing that same moving average band from above.

The recent surge we’ve seen in oil prices may be contributing to the recovery in the loonie, which also coincided with Justin Trudeau’s election victory last week.

If the move continues and the pair breaks back below 1.26, it would push the pair back into bearish territory and could see it gather momentum.

A look at the 4-hour chart suggests it may not be that simple. The momentum indicators are showing a divergence with price action that suggests the move of the last week is fading.

That doesn’t necessarily mean a break of 1.26 isn’t happening but perhaps that we’ll see a pullback first.

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