- USD / CAD was lower on Monday, cutting some of the strong positive from the previous session to two-week highs.
- Rising oil prices propped up the loonie and put some pressure; The renewed purchase of USD helped limit losses.
- The setup appears tilted in favor of bull traders and supports the outlook for some buying to emerge on the dips.
The pair USD / CAD saw some selling on the first day of a new trading week and eroded some of Friday’s strong positive move to two-week highs around the 1.2745-50 bid zone. The pair was last seen trading near the lower end of its daily trading range, around the 1.2675-70 region.
A modest spike in crude oil prices, now around 1% on the day, sustained the Canadian dollar pegged to commodities and put some downward pressure. However, the emergence of new buying interest in US dollars extended some support and helped limit the deeper losses for the USD / CAD pair.
From a technical perspective, last week’s strong bounce from multi-year highs struggled to find acceptance above the 61.8% Fibonacci level of the 1.2882-1.2468 drop. The subsequent pullback has now dragged the USD / CAD pair back to a short-term downtrend line resistance break point.
The aforementioned support turned resistance coincides with the 50% Fibonacci level and should now act as a pivotal point for short-term traders. Since the oscillators on the daily chart have rebounded from bearish territory, the pullback could still be seen as a buying opportunity.
That said, a convincing break below the middle of 1.2600 will negate the positive outlook and make the USD / CAD pair vulnerable to resume its previous / well-established downtrend. The pair could then accelerate the decline towards the 38.2% Fibonacci level, around the 1.2625 region en route to 1.2600.
On the other hand, the 1.2700 round mark now appears to act as immediate resistance. This is followed by the 61.8% Fibonacci level and the 1.2745-50 hurdle. Sustained strength beyond will be seen as a new trigger for bull traders and will pave the way for more short-term gains.
The USD / CAD pair could then aim to break above the 1.2800 round mark and head towards the next major resistance near the 1.2865-85 region tested in January.
4 hour chart