The USD/CAD currency pair is currently navigating a challenging market landscape, with support likely to be tested near the 1.3800 level. The Relative Strength Index (RSI) for the past two weeks has been hovering just above the critical level of 30, reflecting ongoing bearish momentum without indicating oversold conditions. During European trading hours on Tuesday, the pair was fluctuating around 1.3820, retracing gains from prior sessions. Technical analysis paints a picture of persistent weakness as the pair trades within a descending channel.
The RSI’s position suggests that while downward pressure remains significant, it has yet to reach extremes typically associated with oversold markets. Additionally, the current trading price is below the nine-day Exponential Moving Average (EMA) at 1.3837, signaling weak short-term momentum. For traders and analysts, the price movements need to be monitored closely to ascertain the prevailing market trend.
If the downward movement continues, the USD/CAD could retest the psychological level of 1.3800, with further potential declines extending to a seven-month low at 1.3760. This level was last observed on May 2 and sits marginally above the lower boundary of the descending channel, around 1.3750. A decisive break below this channel could amplify bearish sentiment, potentially driving the pair towards even lower targets, such as 1.3419, the lowest seen since February 2024, with an additional support area near 1.3320.
Conversely, the immediate resistance for the USD/CAD pair is identified at the nine-day EMA around 1.3837, followed by a second barrier at approximately 1.3870, which marks the upper edge of the descending channel. A successful breach of any significant resistance levels could signal a shift towards bullish momentum, paving the way for further testing of the resistance levels, including the 50-day EMA at 1.4058 as well as the monthly high around 1.4415.
