The downward leg unfolds over the long term

• USD/CAD is down in a wide range.
• The Loonie will likely decline to range lows or an intermediate target.
• The RSI is oversold, indicating a risk of a reaction, although no signal has yet been given.

USD/CAD is currently down in a long-term range that has a high in the 1.39 range and a low in the 1.31-1.32 range.

The pair is taking a step down in this range as the US dollar (USD) weakens. Both medium-term and short-term trends are now bearish, which, given “the trend is your friend,” favors short positions over long ones.

USD/CAD Daily Chart

The pair is likely to continue to fall in line with the trend, with an eventual target most likely at the range level starting at 1.3220.

An intermediate target is also located at 1.3380, composed of the swing lows of October 2023 and January 2024.

The Relative Strength Index (RSI) momentum indicator is in the oversold region, indicating a pullback risk. However, they say a buy signal will not be given until the RSI breaks out of oversold and re-enters neutral territory (on a closing basis) – which has not happened yet.

Given RSI’s oversold condition, however, traders are advised not to add to their existing short positions. Nor should they close them because the RSI can remain oversold for a long time during downtrends while the price continues to decline.

There is no sign from the price that it is about to pull back as the chart continues to print one red bar after another.