- USD / CAD is on a solid rally from the two-week lows, although there has been no continuation.
- The previous day’s break below a two-week range still favors bears.
- A sustained move above the 1.2625 region is needed to negate the negative outlook.
A combination of supporting factors has helped the USD / CAD to regain positive traction on Friday and to regain some of the previous day’s decline to the two-week lows. The US dollar has found demand again amid a new boost in US Treasury yields. Apart from this, a weaker tone around crude oil prices has weighed on the Canadian dollar, currency pegged to commodity prices, providing an additional boost to the USD / CAD pair.
However, the positive intraday movement has stopped just before the break point of the support of the previous range, near the 1.2575 region. This coincides with the 23.6% Fib retracement of the 1.3737-1.2521 dip and should act as a fundamental point for investors. Meanwhile, the oscillators on the 4-hour and daily charts have maintained their bearish bias and have yet to gain significant traction on the 1-hour chart. The setup remains skewed in favor of the bears and supports the prospects for further declines.
That said, investors could refrain from opening aggressive positions and prefer to wait for the Canadian monthly employment report to be released on Friday. This, in turn, warrants some caution before positioning yourself in a firm direction.
Meanwhile, any further move to the upside could face resistance near the 1.2600 (38.2% Fibonacci) level. This is followed by the previous day’s high, around the 1.2625 region, which if cleared could trigger a rebound in short coverage. The USD / CAD pair could then aim to regain the 1.2700 level with intermediate resistance near the 61.8% Fibonacci, around the 1.2655 region. Momentum could extend further to challenge the 1.2740-50 resistance zone.
On the other hand, the 1.2520 level now appears to act as immediate support. Some subsequent selling, with subsequent weakness below the key psychological level of 1.2500, will make the USD / CAD pair vulnerable to retesting the multi-year lows, around the 1.2470-65 region.
USD / CAD 1 hour chart
USD / CAD technical levels
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