- USD/CAD struggled to capitalize on the overnight bounce and met with a fresh supply on Tuesday.
- The technical set-up supports prospects for an extension of the recent pullback from a one-year high.
- Bears, however, might wait for a convincing break below the 1.2600 mark before placing fresh bets.
The USD/CAD pair struggled to capitalize on the previous day’s goodish rebound from the vicinity of the 1.2600 mark, or a one-month low and met with a fresh supply on Tuesday. The pair maintained its offered tone through the first half of the European session and was last seen trading just below mid-1.2600s.
From a technical perspective, the USD/CAD pair, so far, has managed to hold its neck above confluence support comprising of 100-day SMA and the 50% Fibonacci level of the 1.2288-1.2964 move up. This is closely followed by the overnight swing low, which if broken will be seen as a fresh trigger for bearish traders.
Given that oscillators on the daily chart have started gaining negative traction, a convincing break below will set the stage for an extension of the recent pullback from a one-year high set in December. The USD/CAD pair might then accelerate the fall to the 1.2540 area (61.8% Fibo.) en-route the key 1.2500 psychological mark.
On the flip side, the overnight swing high, around the 1.2700 mark, which coincides with the 38.2% Fibo. level, now seems to act as an immediate strong barrier. Some follow-through buying might push spot prices towards the 1.2755-60 horizontal resistance, above which bulls could aim to conquer the 1.2800 mark.
The latter also represents the 23.6% Fibo. level hurdle and should act as a key pivotal point for traders. A sustained strength beyond might negate any near-term negative bias and trigger a short-covering move, which might push the USD/CAD pair towards the next relevant hurdle near the 1.2860 horizontal zone.
USD/CAD daily chart
Levels to watch