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The Canadian dollar closed at a 30-month high against its southern counterpart, profiting from several factors that have shifted to its favor over the past weeks. It will be difficult for the US dollar to recoup its losses as a rebound in the USD/CAD pair based soley on technical considerations is unlikely given the fundamental factors in play, according to FXStreet’s Analyst Joseph Trevisani.

Key quotes

“Markets are anticipating the global recovery sometime next year and the first beneficiaries have been the commodity currencies. The potential counterweight to that in the USD/CAD, a better performing US economy, seems enmeshed in COVID-19 closures and political wranglings in Congress over a new stimulus package. A new spending and support bill in the US would help balance the accounts but it would not outweigh the other fundamental factors that favor the loonie.”

“Technically, the USD/CAD is still descending, having outstripped all ranges back to May 2018. Friday’s small bounce at the lower border of the channel is not a technical reversal but a market disinclination at the end of the week and after a 2.3% decline since November 23 to break new ground.”

“Except for the channel lower border at about 1.2735 on Monday to start the week, which may offer another bounce or two, support lines reference trading levels from April 2018 and will be an insubstantial brake on the USD/CAD fall.”