USD/CAD reaches new 2024 high; could this move continue?

USD/CAD is trading higher again today, recording its fourth consecutive green candle and reaching a new 5-month high. USD/CAD is trying to break decisively above the upward sloping trend channel that has been in place since the start of 2024 and it is now testing the resistance set at the 1.3704 level.

Momentum indicators are mostly mixed as only the RSI is sending a strong bullish signal. The Average Directional Movement Index (ADX) is uninterested in the current movement as it remains stuck below its 25-threshold. More importantly, the stochastic oscillator is edging higher towards its overbought territory, but a divergence is gradually developing. The higher high recorded in USD/CAD is matched with a lower high in the stochastic oscillator and thus opening the door to a bearish divergence.

Should the bulls remain in control of the market, they could try to keep USD/CAD above the December 16, 2022 high at 1.3704 and have a go at staging a rally towards the 1.3807-1.3854 area. If successful, they could then have the chance to test the resistance set by the 2023 high at 1.3898.

On the flip side, the bears are trying to stop the current advance. They could firstly try to push USD/CAD back inside the trend channel and then attempt a sell-off towards the 23.6% Fibonacci retracement of the April 5, 2022 – October 13, 2022 uptrend at 1.3605 level.

To sum up, USD/CAD bulls are trying to take advantage of the current dollar-positive market momentum, but they need a strong move higher in order to establish their dominance in this pair and record another 2024 high.