USDCAD 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.
USDCAD 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.