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

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