USD/CAD Currency Pair Faces Pressure as It Approaches March Low of 1.3420

The USD/CAD currency pair is under pressure and may attempt to test the March low of 1.3420, as it continues to form a series of lower highs and lower lows. Despite this bearish trend, the exchange rate could consolidate for the remainder of the month if the Relative Strength Index (RSI) remains above the oversold threshold.

Recently, USD/CAD has been recording fresh monthly lows after failing to maintain the August low of 1.3441. The ongoing weakness in the exchange rate is likely to persist, particularly if it continues to follow the negative slope of the 50-Day Simple Moving Average (SMA), currently at 1.3647.

The outlook for USD/CAD suggests a potential bearish trend, especially as the Federal Reserve indicates a lower trajectory for US interest rates. The US Dollar may face challenges leading up to the next Fed interest rate decision scheduled for November 7, as the central bank appears poised to unwind its restrictive monetary policy swiftly.

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If USD/CAD continues to decline, it may push the RSI into oversold territory for the second time this year. However, if the RSI remains above 30, it could signal a reduction in bearish momentum.

Key observations include:

• USD/CAD has extended its decline since the start of the week, reaching a new monthly low of 1.3420. A drop below this March low could bring the February low of 1.3366 into focus.
• The next significant level to watch is around 1.3310, which corresponds to the 50% Fibonacci retracement. However, USD/CAD might attempt to retrace its decline from earlier in the week, as the RSI appears to be recovering from oversold conditions.
• Should USD/CAD manage to reverse the current bearish trend, a push above 1.3520 (23.6% Fibonacci extension) could open the door to revisit the 1.3630 level (38.2% Fibonacci retracement).