USD/CAD Price Analysis: Clings to modest gains above 1.2100 mark, bearish bias remains

A combination of factors assisted USD/CAD to stage a modest recovery from near four-year lows.
Oversold RSI on the daily chart seemed to be the only factor that prompted some short-covering.
The technical set-up still favours bearish traders and supports prospects for additional weakness.

Haresh Menghani FXStreet

The USD/CAD pair edged higher during the early North American session and refreshed daily tops, around the 1.2125 region in the last hour, albeit lacked follow-through.

Declining crude oil prices – now down over 1.30% for the day – undermined the commodity-linked loonie and extended some support to the USD/CAD pair. On the other hand, a modest uptick in the US Treasury bond yields extended some support to the US dollar. Apart from this, a steep fall in the equity markets further benefitted the greenback's relative safe-haven status against its Canadian counterpart.

From a technical perspective, oversold RSI on the daily chart was seen as a key factor that prompted some short-covering move and assisted the USD/CAD pair to snap four days of the losing streak. That said, last week's sustained break below a multi-month descending channel supports prospects for an extension of the well-established bearish trend. This suggests that the attempted recovery might fizzle out quickly.

Hence, any subsequent positive move towards the 1.2145-50 region might be seen as an opportunity to initiate fresh bearish positions. This, in turn, should cap the USD/CAD pair near the mentioned trend-channel support breakpoint, now turned resistance near the 1.2200 round-figure mark. The mentioned handle should now act as a key pivotal point for short-term traders and help determine the near-term trajectory.

On the flip side, the 1.2100 mark now seems to protect the immediate downside ahead of the 1.2080-75 region, or near four-year lows touched on Monday. This is closely followed by September 2017 swing lows, around the 1.2060 region, which if broken decisively should pave the way for additional weakness. The USD/CAD pair might then turn vulnerable and accelerate the fall to challenge the key 1.2000 psychological mark.

USD/CAD daily chart

Technical levels to watch

USD/CAD

Overview
Today last price	1.211
Today Daily Change	0.0009
Today Daily Change %	0.07
Today daily open	1.2101

Trends
Daily SMA20	1.2383
Daily SMA50	1.2493
Daily SMA100	1.261
Daily SMA200	1.2867

Levels
Previous Daily High	1.2137
Previous Daily Low	1.2079
Previous Weekly High	1.2352
Previous Weekly Low	1.2122
Previous Monthly High	1.2654
Previous Monthly Low	1.2266
Daily Fibonacci 38.2%	1.2101
Daily Fibonacci 61.8%	1.2115
Daily Pivot Point S1	1.2075
Daily Pivot Point S2	1.2048
Daily Pivot Point S3	1.2017
Daily Pivot Point R1	1.2132
Daily Pivot Point R2	1.2163
Daily Pivot Point R3	1.219

Author

Haresh Menghani

FXStreet

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

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