USD/CAD Price Analysis: Flirts with 1.2600 ahead of Canadian employment details
- A combination of factors dragged USD/CAD to three-day lows during the European session.
- Higher oil prices underpinned the loonie and exerted downward pressure amid weaker USD.
- Mixed oscillators warrant caution for aggressive bearish traders ahead of Canadian jobs data.
The USD/CAD pair dropped to three-day lows during the first half of the European session, albeit showed some resilience below the 1.2600 mark, or 200-hour SMA.
The risk-on impulse in the markets dented demand for the safe-haven US dollar. Apart from this, a strong pickup in crude oil prices underpinned the commodity-linked loonie and exerted some pressure on the USD/CAD pair. That said, a strong rally in the US Treasury bond yields should act as a tailwind for the USD amid expectations for an imminent Fed taper announcement, which should help limit losses for the major.
From a technical perspective, the intraday slide found some support near the 61.8% Fibonacci level of the recent bounce from sub-1.2500 levels to the post-BoC swing highs, near the 1.2762. This should act as a key pivotal point, which if broken might prompt some technical selling. However, oscillators on the daily chart are yet to confirm a negative bias and warrant some caution for aggressive bearish traders.
Traders might also prefer to wait on the sidelines ahead of the Canadian jobs report, scheduled for release later during the early North American session. This, in turn, makes it prudent to wait for a sustained break below the 1.2600 mark before positioning for any further losses. The USD/CAD pair might then accelerate the fall towards mid-1.2500s en-route the 1.2525-20 region and the key 1.2500 psychological mark.
On the flip side, any meaningful recovery beyond the 50% Fibo. level, around the 1.2625 area, now seems to confront stiff resistance near the 1.2660-65 region. The latter coincides with the 38.2% Fibo. level, above which a bout of short-covering move has the potential to lift the USD/CAD pair back towards the 1.2700 mark, or the 23.6% Fibo. level. Bulls might eventually aim to test the next relevant hurdle near the 1.2720-25 zone.
USD/CAD 1-hour chart
Technical levels to watch