- USD/CAD witnessed some intraday selling on Monday, though lacked follow-through.
- A blowout rally in oil prices underpinned the loonie and exerted downward pressure.
- An extension of the recent USD bullish run helped limit deeper losses, at least for now.
The USD/CAD pair witnessed good two-way price moves through the mid-European session and was last seen trading with only modest intraday losses, just above the 1.2700 mark.
A blowout rally in crude oil prices to the highest level since 2008 underpinned the commodity-linked loonie and prompted some intraday selling around the USD/CAD pair. On the other hand, the US dollar prolonged its recent strong bullish run, which, in turn, acted as a tailwind and assisted the pair to recover around 30-40 pips from sub-1.2700 levels.
This comes on the back of last week's solid rebound from the vicinity of the very important 200-day SMA, or the lowest level since January 26 and favours bullish traders. That said, Friday's failure near the 1.2780-1.2785 supply zone warrants some caution. Hence, it will be prudent to wait for some follow-through buying before positioning for any further gains.
Adding to this, oscillators on the daily chart are holding in the neutral territory. The mixed fundamental backdrop, along with the technical set-up points to indecision over the USD/CAD pair's near-term trajectory. This might further hold back traders from placing aggressive directional bets amid absent relevant market-moving economic releases on Monday.
In the meantime, any meaningful slide is more likely to find decent support near mid-1.2600s. This is followed by the 1.2630-1.2625 region and the 1.2600 mark ahead of the 1.2585 region (200-DMA). A convincing break below the cluster of support levels would be seen as a fresh trigger for bearish traders and make the USD/CAD pair vulnerable to decline further.
The next relevant support is pegged near mid-1.2500s before the USD/CAD pair eventually drops to challenge the key 1.2500 psychological mark. The downward momentum could further get extended towards the YTD low, around the 1.2450 region touched in January.
On the flip side, immediate resistance is pegged near the 1.2750 region ahead of the 1.2780-1.2785 zone. Some follow-through buying, leading to a subsequent strength beyond the 1.2800 mark has the potential to lift the USD/CAD pair back towards February monthly swing high, around the 1.2875-1.2880 region en-route the 1.2900 round-figure mark.
USD/CAD daily chart
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Technical levels to watch
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