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USD/CAD has reversed back higher after testing below the crucial 78.6% retracement at 1.2620, keeping the rangebound environment intact, the Credit Suisse analyst team reports.

See – USD/CAD: Less room for loonie’s depreciation ahead – CIBC

Key quotes

“USD/CAD saw another test below the crucial support area at the 78.6% retracement of the entire 2017/2020 surge at 1.2620. However, the market reverted mildly back higher as expected, posting a small bullish ‘hammer’ and keeping the rangebound environment in place for now, which is also supported by the fact that daily momentum is increasingly divergent and now holds a triple bullish divergence.” 

“Resistance is seen initially at 1.2700/02, then 1.2717, where we would expect to see fresh sellers again. Nevertheless, a break above here would expose 1.2764, removal of which would see 1.2835 next. If reached, this should be a tougher barrier to break, and only beyond here would see a ‘wedge’ small base completed.” 

“Although our base case is for further ranging, we do not rule out that a more direct resumption of the core bear trend is still possible, with the next major support then seen at 1.2527/17.”