USD/CAD Price Analysis: Healthy correction is on cards, 1.3100 a critical support

• USD/CAD is displaying a healthy correction after remaining in the grip of bulls for around a month.
• The corrective move is expected to drag further to 2.6% Fibo retracement at 1.3100.
• Advancing 20 and 50-EMAs indicate more upside ahead.

The USD/CAD pair has witnessed a time-based correction after failing to sustain above the crucial resistance of 1.3200 on Thursday. The asset is declining modestly and may find a cushion sooner as the broader context is extremely bullish. At the press time, the major surrendered the cushion of 1.3150.

After remaining a little short of recapturing the six-week high at 1.3224, the asset is displaying signs of momentum loss but that doesn’t warrant a bearish reversal. As the major has displayed a juggernaut rally, the correction could extend further to near 23.6% Fibonacci retracement (placed from August 11 low at 1.2728 to Thursday’s high at 1.3208) near 1.3100.

Advancing 20-and and 50-period Exponential Moving Averages (EMAs) at 1.3110 and 1.3050 respectively indicates more upside ahead.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, which adds to the upside momentum filters.

A corrective move to near 1.3100 will be a bargain buy for the market participants, which will drive the asset towards a six-week high at 1.3224, followed by the round-level resistance at 1.3300.

Alternatively, a break below the August 23 low at 1.3012 will drag the asset towards 50% FIbo retracement at 1.2972. A breach of the latter will unleash the loonie bulls for more downside towards the August 25 low at 1.2895.

USD/CAD four-hour chart