- A rebound in USD demand, a decline in oil prices extended some support to USD / CAD.
- The lack of strong follow-up purchases supports the prospects for further weakness.
The pair USD / CAD it struggled to capitalize on its intraday rebound from the 1.2585 region and held close to the 34-month lows touched in the previous session.
A turnaround in equity markets helped the safe-haven US dollar to rebound from six-week lows. Aside from this, a pullback in crude oil prices undermined the commodity-pegged Canadian dollar and provided a modest rise to the USD / CAD pair. Despite the combination of support factors, the pair, so far, has been struggling to attract significant purchases and remained confined to the trading range overnight.
Meanwhile, the price action within the range constitutes the formation of a rectangle, which marks a brief pause in the trend, in this case bearish. The negative outlook is reinforced by the fact that the technical indicators on the daily chart remain in bearish territory and are still far from being in the oversold zone. This, in turn, supports the prospects for an extension of the short-term downward trajectory.
A subsequent dip below the multi-year lows around the 1.2580 region will reaffirm the bearish outlook and make the USD / CAD pair vulnerable. The next relevant target on the downside is pegged near the horizontal zone of 1.2540 before the pair finally falls to challenge the key psychological level of 1.2500 for the first time since February 2018.
On the other hand, momentum beyond the immediate 1.2635 hurdle is likely to face stiff resistance ahead of the 1.2700 round mark. It will take a sustained force above to nullify the bearish outlook. The USD / CAD pair could witness some short-term short-term hedging move and aim to test the next relevant resistance near the 1.2740-45 region.
1 hour chart