“¢ NAFTA optimism/positive oil prices continue to underpin Loonie.
“¢ Subdued USD price action does little to provide any respite to bulls.
The USD/CAD pair lost some additional ground on Tuesday and dropped to fresh 2-1/2 month, below mid-1.2900s in the last hour.
A bilateral trade agreement, aimed at replacing NAFTA, was struck between the US and Mexico on Monday. NAFTA optimism provided a strong boost to the Canadian Dollar and prompted some aggressive selling around the major.
The pair fell over 110-pips from an intraday high level of 1.3067 and was further weighed down by a follow-through US Dollar selling pressure. The USD selling bias remained unabated on Tuesday and kept exerting some downward pressure on the major.
Adding to this, a bullish consolidative price action around crude oil prices further underpinned the commodity-linked Loonie and did little to lend any support or provide any immediate respite for the bulls.
Technical Analysis
Today’s downtick could also be attributed to some technical selling, especially after yesterday’s slide below 100-day SMA for the first time since April 20. Hence, a follow-through selling pressure, amid absent market moving economic releases, remains a distinct possibility.
Any subsequent weakness is likely to get extended to levels below the 1.2900 handle towards testing an important support marked by a short-term descending trend-channel formation on the daily chart.
On the flip side, any meaningful recovery attempt might now confront fresh supply and seems more likely to remain capped near 100-day SMA support break-point, now turned strong hurdle around the 1.2995-1.3000 region.
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