USD/CAD drops back to test 1.2400
- USD/CAD drops further on weak USD and higher crude oil.
- Key event ahead: BoC rate decision on Wednesday.
The USD/CAD pair failed to recover ground and dropped back toward the 1.2400 regions. The recovery from previous lows was capped below the 1.2450 area and the 20-hour moving average. Recently the pair printed a fresh 6-day low at 1.2401.
The bearish bias remains intact amid a broad weakens in the US dollar (DXY spot at 3-year lows) and amid global risk appetite. The dollar is falling against the loonie for the third day in-a-row. During that time USD/CAD lost more than a hundred pips. The slide takes place ahead of the Bank of Canada (BoC) meeting.
On Wednesday, BoC will announce its decision on monetary policy. The latest economic data from Canada boosted expectations about a rate hike. Analysts from Wells Fargo, expect the BoC to continue it tightening campaign with a 25bp rate hike. “The recent employment report and the uptick in CPI inflation lifted the odds of an increase. This follows a 25 bps increase in July and another one in September of last year.”
USD/CAD Technical levels
Not much price action volatility is expected for the rest of Monday amid a holiday in the US. The bearish momentum remains strong. The area around 1.2400 is a key support. A break lower could expose 1.2350/55 (Jan low).
To the upside, immediate resistance is seen at 1.2470 (Jan 15 high) followed by 1.2500/05. A rally above1.2600 (20-day moving average) would remove the negative bias for the pair and could open the doors for a test of the key medium-term resistance area at 1.2900.