- A pickup in the USD demand, a pullback in oil prices extended some support to USD/CAD.
- The lack of any strong follow-through buying supports prospects for further weakness.
The USD/CAD pair struggled to capitalize on its intraday bounce from the 1.2585 region and remained well within the striking distance of 34-month lows touched in the previous session.
A turnaround in the equity markets assisted the safe-haven US dollar to rebound from six-week lows. Apart from this, a pullback in crude oil prices undermined the commodity-linked loonie and provided a modest lift to the USD/CAD pair. Despite the combination of supporting factor, the pair, so far, has been struggling to attract any meaningful buying and remained confined in the overnight trading range.
Meanwhile, the range-bound price action constitutes the formation of a rectangle, which marks a brief pause in the trend – bearish in this case. The negative outlook is reinforced by the fact that technical indicators on the daily chart are holding in the bearish territory and are still far from being in the oversold zone. This, in turn, supports prospects for an extension of the near-term downward trajectory.
A subsequent fall below multi-year lows, around the 1.2580 region will reaffirm the bearish outlook and turn the USD/CAD pair vulnerable. The next relevant target on the downside is pegged near the 1.2540 horizontal zone before the pair eventually drops to challenge the key 1.2500 psychological mark for the first time since February 2018.
On the flip side, momentum beyond the 1.2635 immediate hurdle is likely to confront stiff resistance ahead of the 1.2700 round-figure mark. A sustained strength above will be needed to negate the bearish outlook. The USD/CAD pair might then witnessed some near-term short-covering move and aim to test the next relevant resistance near the 1.2740-45 region.
USD/CAD 1-hourly chart
Technical levels to watch
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