Dynamic Support and Extreme Oversold Levels Pave the Way for a Bullish Impulse

Manuel

Forex

Economic

Summary:

The Relative Strength Index (RSI) recently struck a low of 23.11, moving deeply into extreme oversold territory.

BUY USDCAD

EXP

TRADING

1.37700

Entry Price

1.39400

1.36500

1.37125 -0.00281 -0.20%

0.0

Pips

Flat

1.36500

Exit Price

1.37700

Entry Price

1.39400

Reports indicate that the United States and Iran are actively positioning themselves to resume diplomatic negotiations, a development that could materialize as early as this week. A senior U.S. official characterized the current climate as highly dynamic, noting that while the essential "ingredients for a deal" are present, a definitive accord remains elusive. The eventual resolution of this conflict is of paramount importance to global markets, primarily due to its systemic influence on energy expenditures and the resulting shift in inflationary expectations.

From the perspective of U.S. monetary policy, Chicago Fed President Austan Goolsbee issued a stark warning, suggesting that the Federal Reserve might be compelled to delay interest rate cuts until 2027. He observed that a protracted period of elevated oil prices—driven by the ongoing hostilities involving Iran—could significantly obstruct inflation's descent toward the mandated 2% target. In contrast, Governor Stephen Miran offered a more optimistic trajectory, suggesting that inflation could align with the target within a year and expressing skepticism that energy prices will remain structurally elevated.

Adding to this cautious narrative, San Francisco Fed President Mary Daly observed that the latest U.S. inflation report provided few surprises for the Governing Council. Daly indicated that the probability of maintaining interest rates at their current restrictive levels presently exceeds the likelihood of an additional hike. However, she underscored a strictly data-dependent contingency: should inflation remain entrenched above the 2% target for a more protracted period than anticipated, the Federal Reserve will maintain its restrictive policy stance until price stability is conclusively achieved.

Regarding recent economic data, the U.S. Producer Price Index (PPI) for March arrived softer than anticipated, printing at 4% against a forecast of 4.6%. Meanwhile, the Core PPI—which excludes volatile food and energy components—maintained a year-over-year pace of 3.8%, remaining unchanged from February. Conversely, the labor market continues to exhibit remarkable resilience, with the ADP Employment Change four-week average ascending to 39.25K, up from 26K in the preceding week.

Simultaneously, the Canadian labor market evidenced a marginal recovery in March, recording a net employment increase of 14.1K. While this represents a bounce-back from the sharp 83.9K decline in the prior month, the figure fell slightly short of the 15K forecast. Concurrently, the unemployment rate settled at 6.7%, performing better than the 6.8% market expectation.

Regarding monetary policy, the Bank of Canada (BoC) elected to hold its benchmark rate steady at 2.25% during its latest deliberations. The Governing Council is maintaining a posture of high vigilance, analyzing the secondary effects of the recent oil-driven inflationary spike. This decision to maintain the overnight rate at 2.25% highlights the institutional uncertainty surrounding geopolitical impacts on the domestic economy. Market focus now shifts to the upcoming April 29 decision, which will be accompanied by the high-impact Monetary Policy Report (MPR). Dynamic Support and Extreme Oversold Levels Pave the Way for a Bullish Impulse_1

Dynamic Support and Extreme Oversold Levels Pave the Way for a Bullish Impulse_1

Technical Analysis

From a technical perspective, USD/CAD has recently undergone a corrective downward move following its ascent to a multi-month high of 1.3965 on March 31. This retracement brought price action down to a local support floor at 1.3733. Critically, the 200-period Moving Average (MA) is currently situated within this immediate zone at 1.3757, while the 100-period MA tracks higher at 1.3854.

The 200-period MA is of particular significance here, as price action recently reclaimed this level with notable speed. Furthermore, this dynamic support is almost perfectly aligned with the 0.50 Fibonacci retracement level, creating a high-confluence zone. This alignment adds substantial structural weight to the thesis that a resurgent bullish impulse could initiate from this floor.

Our analysis of momentum oscillators provides further validation for a potential bullish pivot. The Relative Strength Index (RSI) recently struck a low of 23.11, moving deeply into extreme oversold territory. Such depressed RSI levels have not been witnessed in the pair’s recent history, significantly increasing the probability of a sharp bullish rejection as sellers face exhaustion.

Simultaneously, the MACD is currently printing a bearish histogram, though the bars are visibly losing depth, signaling that downward momentum is dissipating. A transition into a positive histogram, accompanied by a bullish crossover of the signal lines into the upper quadrant, would provide the final technical confirmation required to target a retest of the 1.3944 resistance zone.

Trading Recommendations

Trading direction: Buy

Entry price: 1.3764

Target price: 1.3940

Stop loss: 1.3650

Validity: Apr 24, 2026 15:00:00

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Dynamic Support and Extreme Oversold Levels Pave the Way for a Bullish Impulse

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