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  • USD/CAD continues a deeper sell-off to 1.2700 area amid oil price recovery.
  • The US dollar corrects as speculation on tapering have been dampened by the rise in COVID-19 cases.
  • Better risk mode amid rising equities continues to provide some relief to the Canadian dollar and other riskier assets.

The USD/CAD price analysis shows a probability of further decline amid a corrective pullback in the US dollar followed by oil price recovery.

During the first half of the New York session, the USD/CAD pair continued to lose ground steadily. It dropped to two-day lows around 1.2710.

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Several traders responded to Friday’s extended sharp pullback from year-to-date highs near mid-1.2900 with follow-up selling. The Canadian dollar was supported by a strong rebound in crude oil prices. The ongoing correction in the value of the US dollar, this led to some unwinding trading in the USD/CAD pair.

The growing number of cases of delta Coronavirus has prompted investors to lower their expectations for the Fed’s stranglehold plan due to fears that it could affect the recovery of the global economy. Additionally, the generally positive tone of the stock market dumped pressure on the USD/CAD pair due to its dollar-haven status.

However, a new wave of travel restrictions could put a damper on prospects for a rapid recovery of global fuel demand. As a result, oil prices may be threatened by this. Nevertheless, the dollar’s losses may be limited if US Treasury yields rise, adding some support to the USD/CAD pair.

In addition, investors can wait until Fed Chairman Jerome Powell speaks in Jackson Hole before they aggressively bet on tapering. Therefore, USD/CAD has peaked, and we should prepare for further devaluations by waiting for some strong follow-up selling.

As we start the North American session, market participants eagerly await US PMIs for manufacturing and services. US bond yields, as well as sentiment about broader market risk, could impact the dollar. The USD/CAD pair may still be on traders’ radars to look for short-term opportunities based on oil price movements.

USD/CAD price technical analysis: Bulls struggling below 20-SMA

USD/CAD 4-hou price chart analysis
USD/CAD 4-hou price chart analysis

The USD/CAD pair continued the sell-off initiated on Friday, and a follow-up selling on Monday further plummeted to the 1.2700 area, which is interim support at the moment. The price has settled below the 20-period SMA on the 4-hour chart. However, the further slide can find support at 50-perod SMA on the 4-hour chart at 1.2675 area. The ultimate support lies at 200-period SMA at 1.2550 zone.

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The pair has so far moved around 151% of the average daily range. It means we have a chance of upside correction in the New York session. We can look for buying opportunities here or find a selling opportunity if the price gains and pauses near the 20-period SMA.

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