USD/CAD is overbought but a stronger move lower is needed to signal increased downside risks – Scotiabank

USD/CAD saw a strong rejection of the 1.36 area on Wednesday. Economists at Scotiabank analyze the pair’s outlook.

Underlying dynamics remain USD-bullish on the trend oscillators

Spot’s reaction to Wedneday’s test of the 1.36 area (effectively a retest of trend support-turned-resistance) looks USD-negative on the face of it, with the intraday chart reflecting a big, bearish ‘shooting star’ candle on the six-hour chart. But the USD is grinding a little higher again so far today and underlying dynamics remain USD-bullish on the trend oscillators. 

The USD is overbought but a stronger move lower is needed to signal increased downside risks at this point. 

Resistance is 1.3555/1.3565 and 1.3600/1.3610. Support is 1.3495/1.3505.