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USD/CAD At Risk Of More Downsides Below 1.2500

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Technical analysis of Forex market

Key Highlights

  • USD/CAD declined below the 1.2800 and 1.2700 support levels.
  • A major bearish trend line is forming with resistance near 1.2770 on the daily chart.
  • GBP/USD cleared 1.3900, EUR/USD failed to surpass the 1.2150 resistance.
  • Canada’s CPI could increase 0.8% in Jan 2021 (YoY), up from 0.7%.

USD/CAD Technical Analysis

The US Dollar started a steady decline from well above 1.3000 against the Canadian Dollar. USD/CAD even settled below the 1.2800 support zone to move into a bearish zone.

Looking at the daily chart, the pair settled well below the 1.2800 and 1.2780 support levels. There was a test of the 1.2600 support zone before the pair recovered higher. However, the pair failed to continue higher above 1.2880.

A high was formed near 1.2881 before there was a fresh decline. The pair broke the 1.2750 and 1.2700 support levels. It is now trading below 1.2700, and settled well below the 100-day simple moving average (red) and the 200-day simple moving average (green).

On the downside, the 1.2580 level is a decent support. A break below 1.2580 could open the doors for a push towards the 1.2500 and 1.2450 levels.

On the upside, the first key resistance is near the 1.2700 level. The next major resistance sits near the 1.2750. There is also a major bearish trend line forming with resistance near 1.2770 on the daily chart.

A clear break above the trend line resistance is must for a steady recovery wave towards 1.2800 and 1.3000. Looking at EUR/USD, the pair spiked above the 1.2150 resistance, but it failed to continue higher and trimmed most gains. Gold price is declining and it is trading well below $1,820.

Economic Releases

  • UK Consumer Price Index Jan 2021 (YoY) – Forecast +2.1%, versus +1.8% previous.
  • UK Core Consumer Price Index Jan 2021 (YoY) – Forecast +1.8%, versus +1.6% previous.
  • US Producer Price Index Jan 2021 (MoM) – Forecast +0.4%, versus +0.3% previous.
  • Canadian Consumer Price Index Jan 2021 (MoM) – Forecast +0.4%, versus -0.2% previous.
  • Canadian Consumer Price Index Jan 2021 (YoY) – Forecast +0.8%, versus +0.7% previous.