USD/CAD Price Analysis: Bounces off multi-week low, upside potential seems limited

A combination of factors assisted USD/CAD to reverse the early slide to a three-week low.
Ascending channel breakdown supports prospects for an extension of the recent decline.
Any further recovery move might get sold into and remain capped near the 1.2800 mark.

Haresh Menghani FXStreet

The USD/CAD pair reversed an intraday dip to a near three-week low and was last seen trading around the 1.2730-35 region, just a few pips below the daily swing high.

A modest pullback in the equity markets benefitted the safe-haven US dollar for the second successive day on Friday. Apart from this, retreating crude oil prices undermined the commodity-linked loonie and assisted the USD/CAD pair to attract some dip-buying near the 1.2715 region.

Looking at the technical picture, the overnight fall and the subsequent decline during the early part of the trading on Friday confirmed a near-term breakdown through an upwards sloping channel. This might have already set the stage for an extension of the recent downfall.

Moreover, technical indicators on the daily chart have just started drifting into the negative territory and add credence to the negative outlook. Hence, any meaningful recovery attempt could be seen as a selling opportunity and runs the risk of fizzling out quickly.

From current levels, any further recovery move is more likely to meet with a fresh supply near the 1.2770-75 horizontal support breakpoint. This, in turn, should cap the upside for the USD/CAD pair near the 1.2800 mark, which should now act as a pivotal point.

That said, a sustained strength beyond might prompt some short-covering move and lift the USD/CAD pair back towards the 1.2835-45 supply zone. Some follow-through buying will negate the negative bias and pave the way for a further near-term appreciating move.

On the flip side, the daily swing low, around the 1.2715 region, now seems to protect the immediate downside ahead of the 1.2700 mark. Failure to defend the mentioned support levels could drag the USD/CAD pair to mid-1.2600s (50-DMA) en-route 100-DMA, around the 1.2625 area.

USD/CAD daily chart

Technical levels to watch

USD/CAD

Overview
Today last price	1.2736
Today Daily Change	-0.0011
Today Daily Change %	-0.09
Today daily open	1.2747

Trends
Daily SMA20	1.2799
Daily SMA50	1.2648
Daily SMA100	1.2626
Daily SMA200	1.2498

Levels
Previous Daily High	1.2813
Previous Daily Low	1.2738
Previous Weekly High	1.2964
Previous Weekly Low	1.2786
Previous Monthly High	1.2837
Previous Monthly Low	1.2352
Daily Fibonacci 38.2%	1.2766
Daily Fibonacci 61.8%	1.2784
Daily Pivot Point S1	1.2719
Daily Pivot Point S2	1.2691
Daily Pivot Point S3	1.2644
Daily Pivot Point R1	1.2794
Daily Pivot Point R2	1.2841
Daily Pivot Point R3	1.2869

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

EUR/USD stays weak near 1.1850 after dismal German ZEW data

EUR/USD remains in the red near 1.1850 in the European session on Tuesday. A broad US Dollar bullish consolidation combined with a softer risk tone keep the pair undermined alongside downbeat German ZEW sentiment readings for February.

GBP/USD holds losees near 1.3600 after weak UK jobs report

GBP/USD is holding moderate losses near the 1.3600 level in Tuesday's European trading. The United Kingdom employment data suggested worsening labor market conditions, bolstering bets for a BoE interest rate cut next month. This narrative keeps the Pound Sterling under bearish pressure.

Gold pares intraday losses; keeps the red above $4,900 amid receding safe-haven demand

Gold (XAU/USD) attracts some follow-through selling for the second straight day and dives to over a one-week low, around the $4,858 area, heading into the European session on Tuesday.

Canada CPI expected to show sticky inflation in January, still above BoC’s target

Economists see the headline CPI rising by 2.4% in a year to January, still above the BoC’s target and matching December’s increase. On a monthly basis, prices are expected to rise by 0.1%.

The week ahead: Key inflation readings and why the AI trade could be overdone

It is likely to be a quiet start to the week, with US markets closed on Monday for Presidents Day. European markets are higher across the board and gold is clinging to the $5,000 level after the tamer than expected CPI report in the US reduced haven flows to precious metals.

Stellar mixed sentiment caps recovery

Stellar price remains under pressure, trading at $0.170 on Tuesday after failing to close above the key resistance on Sunday. The derivatives metric supports the bearish sentiment, with XLM’s short bets rising among traders and funding rates turning negative.