USD/CAD remains weak following a drop below the key 1.2700 level and out of a 2-month range. In the near-term, the pair has a firmer undertone after making a recovery off 3-month lows and is now testing 1.2500 which is seen as a strong support level.
The odds for a sustained rebound are low at the moment. RSI is still in bearish territory below 50 and USDCAD is capped by the 100-day moving average at 1.2590. The recovery back above the key 1.2500 level from 1.2355 indicates that the decline from the 1.2900 handle has stabilized.
USD/CAD is expected to remain neutral and consolidate around 1.2500 in the short term. The market needs to make a sustained move above yesterday’s high and above the 100-day MA in order to confirm whether the recent rebound off 1.2355 is not just a corrective move of the downtrend from the December 19 high but rather the start of a bullish phase.
by Selena Nicholas, XM Investment Research Desk