After rallying for several years at a clip that surprised most, USDCAD began to unravel in epic fashion starting in the third week of January. In a matter of 74 trading days, the pair gave up a massive 2,200 pips.
But many are now wondering whether the oil-sensitive pair has found a bottom. The rally that began last Tuesday looks promising if you’re a bull, but does it have legs?
One level could give us the answer. The 1.2850 handle previously acted as support in July and October of 2015 as well as in March of this year before things fell apart on April 12th.
But the weakness didn’t last long as the previous week’s two-day rally (the third and fourth of May) put prices back above the key handle. We then saw an example of 1.2850 acting as support once again with the pin bar on May 5th, which brings us to the level of focus this week.
Any bullish price action on a retest of the 1.2850 area could offer a favorable opportunity to get long. There isn’t much in the way of resistance until the 1.3167 area followed by 1.3437.
Of course, if 1.2850 fails to hold on a daily closing basis, we could see a move back toward the 2016 low at 1.2460.
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