USDCAD Vulnerable to Further Downside

Rebound in crude oil prices and revival in demand for risky assets strengthened CAD against USD, taking USDCAD currency pair below 1.3650 strong horizontal support. This horizontal support when coupled with a short-term descending trend-line resistance constituted towards a descending triangular formation. Hence, break below 1.3650 level accelerated the fall, dragging the pair towards 1.3500 psychological mark support.

From current levels, the pair should easily test an important support confluence near 1.3420-10 area. This support area comprises of 200-day SMA and 50% Fibonacci retracement level of June 2015 to Jan. 2016 up-swing. Should the weakness gains momentum and drag the pair below this important support confluence, the pair seems more likely to continue with its near-term depreciating move towards 61.8% Fibonacci retracement level support near 1.3100 mark, with 1.3200 round figure mark acting as intermediate support.

Meanwhile, daily RSI (currently reading 33.00) seems to be heading towards near-term oversold territory, suggesting a rebound from 1.3420-10 support confluence. However, any attempts of recovery now seems to confront immediate hurdle near 1.3570-75 area, which if cleared is likely to extend the pull-back towards the descending triangular formation support break-point, now turned resistance, near 1.3650-60 region.

Positional traders, anticipating a break-down below 1.3400 mark and are aiming for 1.3200-1.3100 downside momentum, should place their stop-loss at 38.2% Fibonacci retracement level resistance near 1.3700-10 area. On the other hand, immediate resistance near 1.3570-75 area should be considered as stop-loss for day / short-term traders.